Qualcomm (QCOM) Receives a Downgrade Following Q3 Results

Qualcomm Inc. (NASDAQ:QCOM), founded in 1985, is a pioneer of key components used in the wireless technologies of the modern world. It primarily invents and licenses technologies, besides designing semiconductor chips. Qualcomm is regarded as the world’s biggest supplier of chips that connect cell phones to wireless networks.

The San Diego, California-based company on Wednesday announced mixed results for the first quarter. It reported adjusted earnings of $2.17 per share for the three months ended Dec. 27, beating Wall Street’s average forecast of $2.10 per share. Revenue came in at $8.24 billion, up 62 percent from the comparable period of 2019, but slightly shy of $8.25 billion projected by analysts.

The financial numbers show exceptional growth on a year-over-year basis, as the company capitalized on the strong demand for 5G-enabled smartphones.

If we look at the performance of key segments, revenue from the mobile phone chips business climbed 79 percent to $4.22 billion, revenue from the radio frequency chips segment skyrocketed 157 percent to $1.06 billion, and revenue from the automotive chips business rose 44 percent to $212 million. Moreover, the company’s licensing division generated revenue of $1.66 billion, translating to a surge of 18 percent from the year-ago quarter.

Looking forward, Qualcomm expects to report revenue in the range of $7.2 billion and $8 billion for the current quarter, higher than what most analysts predicted.

An analyst at Citi Research on Thursday downgraded Qualcomm following Q3 results. Analyst Christopher Danely cut his ratings for QCOM from “Buy” to “Neutral.” He also trimmed his price target for the stock from $194 per share to $165 per share, saying the 5G upgrade cycle is over and the company may have to deal with lower margins in the future.

Qualcomm shares fell nearly 10 percent on heavy volume in the mid-day trading Thursday following the downgrade. The stock has not gained any value so far in 2020.