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Why Is Qualcomm (QCOM) Down 7.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qualcomm due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Qualcomm Q1 Earnings Beat on Healthy Revenue Growth
Qualcomm reported solid first-quarter fiscal 2022 results with record non-GAAP earnings and revenues, driven by the ramp-up in 5G-enabled chips and a surge in demand for essential products and services that are the building blocks for digital transformation in the cloud economy. Both the bottom line and the top line increased year over year and surpassed the respective Zacks Consensus Estimate, backed by the strength of the business model, revenue diversification and the ability to respond proactively to the evolving market scenario.
Net Income
On a GAAP basis, net income in the December quarter improved to $3,399 million or $2.98 per share from $2,455 million or $2.12 per share in the prior-year quarter. The increase in GAAP earnings was primarily attributable to top-line growth.
Quarterly non-GAAP net income came in at $3,686 million or $3.23 per share compared with $2,510 million or $2.17 per share in the year-ago quarter. Undeterred by the supply chain adversities, the non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 22 cents.
Revenues
On a GAAP basis, total revenues in the fiscal first quarter were $10,705 million compared with $8,235 million in the prior-year quarter. The increase in revenues was driven by 5G ramp-up, chip design win momentum, RF front-end demand and a rise in consumer electronics revenues with diligent execution of operational plans and resilient business culture acting as catalysts. In addition, the company witnessed strong momentum in IoT across consumer, edge networking and industrial sectors, along with strength in Snapdragon portfolio within the automotive sector. The GAAP revenues in the quarter were at the higher end of the company’s guided range.
Non-GAAP revenues in the reported quarter were $10,697 million compared with $8,226 million in the year-earlier quarter. The figure beat the consensus mark of $10,450 million, driven by 5G strength, high-performing core chipsets and new RF front-end content.
Segment Results
Quarterly revenues from Qualcomm CDMA Technologies (QCT) improved 35% year over year to $8,847 million driven by strength in handsets and higher demand in adjacent platforms beyond mobile (RF front-end, automotive, and IoT), coupled with higher chip shipments. The company is witnessing healthy traction in EDGE networking that helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The Wi-Fi 6 immersive home platforms continue to gain momentum with significant expansion in China, one of the fastest-growing markets for Wi-Fi 6 for both retail and carrier deployments. The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are also fueling emerging automotive industry trends such as the growth in connected vehicles, the transformation of the in-car experience and vehicle electrification. The Snapdragon digital chassis is an open and scalable cloud-enabled platform for telematics, connectivity, digital cockpit and ADAS that uniquely positions Qualcomm as the leading system solution provider for silicon, software, systems and services across multiple domains. The company believes that it is on track to become the largest smartphone RF front-end supplier by revenues as RF front-end revenues of $1,132 million increased 7% year over year. While handset revenues were up 42% to $5,983 million, automotive and IoT revenues rose 21% and 41%, respectively, to $256 million and $1,476 million. EBT margin increased to 35% from 29%.
Qualcomm Technology Licensing (QTL) revenues totaled $1,818 million, up 10% year over year, driven by higher royalty revenues from Huawei, better-than-expected global handset shipments and a favorable OEM mix. The company expects healthy revenue stream from this segment with more than 150 5G license agreements. EBT margin remained flat at 77%.
Cash Flow & Liquidity
Qualcomm generated $2,057 million of net cash from operating activities in first-quarter fiscal 2022 compared with $3,175 million a year ago. At quarter-end, the company had $6,607 million in cash and cash equivalents and $13,708 million of long-term debt. The company repurchased 8 million shares for $1.2 billion during the quarter.
Q2 Guidance
For the second quarter of fiscal 2022, Qualcomm expects GAAP revenues of $10.2-$11 billion. Non-GAAP earnings are projected to be $2.80-$3.00 per share, while GAAP earnings are likely to be $2.39-$2.59 per share. Revenues from QTL are expected between $1.45 billion and $1.65 billion. For QCT, the company anticipates revenues between $8.7 billion and $9.3 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 20.44% due to these changes.
VGM Scores
At this time, Qualcomm has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qualcomm has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Qualcomm (QCOM) Down 7.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qualcomm due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Qualcomm Q1 Earnings Beat on Healthy Revenue Growth
Qualcomm reported solid first-quarter fiscal 2022 results with record non-GAAP earnings and revenues, driven by the ramp-up in 5G-enabled chips and a surge in demand for essential products and services that are the building blocks for digital transformation in the cloud economy. Both the bottom line and the top line increased year over year and surpassed the respective Zacks Consensus Estimate, backed by the strength of the business model, revenue diversification and the ability to respond proactively to the evolving market scenario.
Net Income
On a GAAP basis, net income in the December quarter improved to $3,399 million or $2.98 per share from $2,455 million or $2.12 per share in the prior-year quarter. The increase in GAAP earnings was primarily attributable to top-line growth.
Quarterly non-GAAP net income came in at $3,686 million or $3.23 per share compared with $2,510 million or $2.17 per share in the year-ago quarter. Undeterred by the supply chain adversities, the non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 22 cents.
Revenues
On a GAAP basis, total revenues in the fiscal first quarter were $10,705 million compared with $8,235 million in the prior-year quarter. The increase in revenues was driven by 5G ramp-up, chip design win momentum, RF front-end demand and a rise in consumer electronics revenues with diligent execution of operational plans and resilient business culture acting as catalysts. In addition, the company witnessed strong momentum in IoT across consumer, edge networking and industrial sectors, along with strength in Snapdragon portfolio within the automotive sector. The GAAP revenues in the quarter were at the higher end of the company’s guided range.
Non-GAAP revenues in the reported quarter were $10,697 million compared with $8,226 million in the year-earlier quarter. The figure beat the consensus mark of $10,450 million, driven by 5G strength, high-performing core chipsets and new RF front-end content.
Segment Results
Quarterly revenues from Qualcomm CDMA Technologies (QCT) improved 35% year over year to $8,847 million driven by strength in handsets and higher demand in adjacent platforms beyond mobile (RF front-end, automotive, and IoT), coupled with higher chip shipments. The company is witnessing healthy traction in EDGE networking that helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The Wi-Fi 6 immersive home platforms continue to gain momentum with significant expansion in China, one of the fastest-growing markets for Wi-Fi 6 for both retail and carrier deployments. The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are also fueling emerging automotive industry trends such as the growth in connected vehicles, the transformation of the in-car experience and vehicle electrification. The Snapdragon digital chassis is an open and scalable cloud-enabled platform for telematics, connectivity, digital cockpit and ADAS that uniquely positions Qualcomm as the leading system solution provider for silicon, software, systems and services across multiple domains. The company believes that it is on track to become the largest smartphone RF front-end supplier by revenues as RF front-end revenues of $1,132 million increased 7% year over year. While handset revenues were up 42% to $5,983 million, automotive and IoT revenues rose 21% and 41%, respectively, to $256 million and $1,476 million. EBT margin increased to 35% from 29%.
Qualcomm Technology Licensing (QTL) revenues totaled $1,818 million, up 10% year over year, driven by higher royalty revenues from Huawei, better-than-expected global handset shipments and a favorable OEM mix. The company expects healthy revenue stream from this segment with more than 150 5G license agreements. EBT margin remained flat at 77%.
Cash Flow & Liquidity
Qualcomm generated $2,057 million of net cash from operating activities in first-quarter fiscal 2022 compared with $3,175 million a year ago. At quarter-end, the company had $6,607 million in cash and cash equivalents and $13,708 million of long-term debt. The company repurchased 8 million shares for $1.2 billion during the quarter.
Q2 Guidance
For the second quarter of fiscal 2022, Qualcomm expects GAAP revenues of $10.2-$11 billion. Non-GAAP earnings are projected to be $2.80-$3.00 per share, while GAAP earnings are likely to be $2.39-$2.59 per share. Revenues from QTL are expected between $1.45 billion and $1.65 billion. For QCT, the company anticipates revenues between $8.7 billion and $9.3 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 20.44% due to these changes.
VGM Scores
At this time, Qualcomm has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qualcomm has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.