As you likely know, AI stocks have been pulling back in recent weeks. Qualcomm (NASDAQ:QCOM) is no exception. During this time frame, Qualcomm stock has fallen by around 20%, from around $200 to around $160 per share.With broad sentiment for the AI growth trend shifting to bearish, not even the release of solid quarterly results has been enough to fight the trend. Worse yet, with this reversal, Qualcomm skeptics are coming out of the woodwork. Once again, they are laying out the bear case for this mobile-fo ...

Investment Rating - The report maintains a "Buy" rating for Qualcomm (QCOM.O) [1][3] Core Insights - Qualcomm's FY2024 Q3 revenue reached $9.39 billion, a year-over-year increase of 11.3%, with a gross margin of 55.6%, up 0.37 percentage points from the previous year. GAAP net profit was $2.13 billion, up 18% year-over-year, while Non-GAAP net profit was $2.65 billion, reflecting a 25.8% increase [2][3] - The mobile business showed significant growth, and the PC chip sales have commenced. The QCT (semiconductor) segment generated $8.07 billion in revenue, a 12.5% year-over-year increase, with an EBT of $2.18 billion and a pre-tax profit margin of 27%, up 2.7 percentage points year-over-year [2] - The automotive segment saw remarkable growth, with revenue of $810 million, a year-over-year increase of 86.9%. Qualcomm secured over 10 new design wins with global automotive manufacturers [2] Summary by Sections Financial Performance - FY2024 Q3 revenue: $9.39 billion, up 11.3% YoY - Gross margin: 55.6%, up 0.37 percentage points YoY - GAAP net profit: $2.13 billion, up 18% YoY - Non-GAAP net profit: $2.65 billion, up 25.8% YoY [2] Business Segments - QCT revenue: $8.07 billion, up 12.5% YoY - Mobile business revenue: $5.9 billion, up 12.3% YoY - IoT revenue: $1.36 billion, down 8.5% YoY - Automotive revenue: $810 million, up 86.9% YoY [2] Future Guidance - For FY24Q4, Qualcomm expects overall revenue to be between $9.5 billion and $10.3 billion, with a midpoint growth of 14.6% YoY. QCT revenue is projected to be between $8.1 billion and $8.7 billion, with a midpoint growth of 13.9% YoY [3] - Adjusted EPS for FY24Q4 is expected to be between $2.45 and $2.65 [3] Profitability Forecast - Projected GAAP/Non-GAAP net profit CAGR over the next three years is 25.4% and 16.8%, respectively [3]

Investment Rating - The report maintains a "Buy" rating for Qualcomm (QCOM.US) with a target price of $240.7, indicating a potential upside of 51% from the current price of $159.3 [1][2][3]. Core Insights - Qualcomm's FY3Q24 performance aligns with market expectations, and the guidance for FY4Q24 is slightly above market forecasts. The company is expected to benefit significantly from the expansion of edge AI applications, particularly in smartphones, electric vehicles, and AI PCs [1][2]. - The report highlights that the average selling price of smartphone chips is expected to rise due to increased demand for high-end models in China. Additionally, the penetration of smart cockpit and autonomous driving technologies in electric vehicles is projected to contribute to new revenue streams, with automotive revenue expected to reach $4 billion by FY2026 [1][2]. - The next-generation Snapdragon 8 series chips will utilize Qualcomm's proprietary Oryon CPU platform, enhancing the company's autonomy in optimization [1][2]. Financial Performance Summary - For FY3Q24, Qualcomm reported revenues of $9.393 billion, a year-over-year increase of 11%, with a gross margin of 55.6% [6][7]. - The guidance for FY4Q24 anticipates revenue growth of 8% quarter-over-quarter and 15% year-over-year, with expectations of low single-digit growth in mobile business and low double-digit growth in IoT [1][6]. - The projected revenues for FY2024 are $38.687 billion, with a net profit of $9.502 billion, reflecting a 31% increase year-over-year [5][6]. Valuation - The report employs a DCF valuation method, assuming a growth rate of 12% for FY2029-FY2033 and a perpetual growth rate of 3%, with a WACC of 11.2%. The target price of $240.7 corresponds to a FY2024 PE of 28.4x [2][3].

Investment Rating - The report maintains a positive outlook on Qualcomm, projecting revenue growth and strong performance in various segments, particularly in automotive and mobile chip businesses [2][19][29]. Core Insights - Qualcomm's Q2 FY2024 performance exceeded expectations, driven by smartphone chip sales, with revenue reaching $9.4 billion, a year-over-year increase of 11% [3][7]. - The automotive chip segment achieved record revenue for four consecutive quarters, with a 87% year-over-year increase, and the company anticipates automotive revenue to reach $4 billion by 2026 [3][11][30]. - The IoT business showed signs of recovery, with revenue of $1.4 billion, down 8% year-over-year, but expected to benefit from AI PC and XR growth [3][19][27]. - Qualcomm expects Q3 FY2024 revenue to be between $9.5 billion and $10.3 billion, with adjusted EPS projected at $2.45 to $2.65, reflecting a year-over-year increase of 25% to 35% [19][21]. Revenue and Profitability - In Q2 FY2024, Qualcomm reported revenue of $9.4 billion and net income of $2.13 billion, with an EPS of $1.88, marking an 18% increase year-over-year [3][7][28]. - The QCT segment (Qualcomm CDMA Technologies) generated $8.1 billion in revenue, with a gross margin of 27%, driven by growth in automotive and IoT sectors [9][28]. - The QTL segment (Qualcomm Technology Licensing) reported revenue of $1.3 billion, with a gross margin of 70%, aligning with expectations [12][28]. Business Segment Performance - The smartphone business generated $5.9 billion in revenue, reflecting a 12% year-over-year increase, supported by strong sales in high-end Android devices [10][28]. - The automotive business reached $811 million in revenue, marking a significant increase and showcasing Qualcomm's commitment to this sector [11][30]. - The IoT segment's revenue was $1.4 billion, indicating a slowdown but with expectations for recovery driven by AI applications [3][19][27]. Future Guidance - Qualcomm anticipates Q3 FY2024 revenue between $9.5 billion and $10.3 billion, with adjusted EPS of $2.45 to $2.65, indicating strong growth prospects [19][21]. - The company projects QCT revenue for Q3 FY2024 to be between $8.1 billion and $8.7 billion, with growth in mobile and IoT sectors expected [20][29]. - For the fiscal year 2024, Qualcomm expects a revenue increase of approximately 50% and an operating expense of around $2.2 billion [23][29].

Investment Rating - The report maintains an "Overweight" rating for Qualcomm (QCOM, US) [2][10]. Core Insights - Qualcomm's automotive business growth exceeded expectations, with strong demand in the automotive market and a positive long-term outlook driven by advancements in smart driving and edge AI [1][2]. - The company reported Q3 FY24 revenue of $9.39 billion, a year-on-year increase of 11%, and net profit of $2.129 billion, up 18% year-on-year [2][10]. - The revenue forecast for FY2024, FY2025, and FY2026 has been adjusted to $38.445 billion, $42.964 billion, and $47.135 billion respectively, with net profits projected at $11.281 billion, $13.055 billion, and $14.412 billion [2][10]. Summary by Sections 1. Performance Overview - Q3 FY24 revenue and net profit surpassed expectations, with revenue at $9.39 billion and net profit at $2.129 billion [2][10]. - The QCT segment generated $8.069 billion in revenue, with mobile and automotive segments contributing $5.899 billion and $0.811 billion respectively [2][10]. 2. Segment Performance - The automotive segment saw a remarkable year-on-year growth of 87%, significantly exceeding market expectations [2][10]. - Mobile revenue growth returned to double digits, with a year-on-year increase of over 50% in China OEM revenue [2][10]. 3. Investment Recommendations - The report suggests a target price adjustment to $231, based on a FY2025 Forward P/E of 20X, leading to a target market capitalization of $227 billion [2][10]. - The overall outlook remains positive, with expectations of continued growth driven by the integration of AI across all business lines [2][10].

Core Viewpoint - Qualcomm reported strong fiscal Q3 results but provided weak guidance for the upcoming December quarter, leading to a significant drop in its stock price despite analysts maintaining a positive outlook due to AI developments [1][3]. Financial Performance - Qualcomm's adjusted EPS for Q3 was $2.33, surpassing the expected $2.25 per share [1]. - The company's revenue reached $9.39 billion, exceeding the consensus estimate of $9.22 billion [1]. - Net income for the quarter was $2.13 billion, or $1.88 per share, compared to $1.8 billion, or $1.60 per share, in the same quarter last year [2]. Strategic Developments - CEO Cristiano Amon emphasized the successful execution of Qualcomm's growth and diversification strategy, particularly highlighting the launch of Snapdragon X Series solutions for personal computers [2]. - These new semiconductors are expected to provide superior performance, power efficiency, and personalized AI experiences [2]. Market Outlook - Despite the fiscal Q3 beat, Qualcomm's stock fell over 9% due to management's guidance of mid-single-digit growth for the December quarter, which disappointed investors expecting double-digit growth [3]. - Analysts from Piper Sandler noted that Qualcomm's Q3 results and Q4 guidance exceeded expectations, driven by strength in Android and upcoming growth with modem-only customers [3]. Analyst Sentiment - Piper Sandler raised its price target for Qualcomm from $185 to $205 per share, maintaining an "overweight" rating, while the consensus view is a moderate buy with an average price target of $207.60 per share [4]. - Analysts believe that over half of all PCs will be AI-capable by 2027, positioning Qualcomm favorably in the long term [4].

Core Insights - Qualcomm reported Q3'24 adjusted EPS of $2.33, exceeding consensus estimates of $2.25, and provided a strong Q4'24 forecast of $2.45-2.65/share [1][5] - Revenue growth in Q3'24 was driven by a significant increase in handset revenue (up 87%) and automotive revenue (up 12%) within the QCT segment [1][4] - The company is optimistic about future growth, particularly in the automotive sector, projecting revenue to reach $4 billion by 2026 [4] Financial Performance - Q3'24 adjusted EPS was $2.33, beating estimates, with a strong forecast for Q4'24 of $2.45-2.65/share [1][5] - Total revenue for Q4'24 is expected to be between $9.5-10.3 billion, representing a year-over-year increase of 10-19% [5] - For the full fiscal year 2024, Qualcomm is projected to generate $38.34 billion in revenue and adjusted EPS of $10.06/share [6] Segment Analysis - The handset segment is expected to benefit from premium smartphone sales, with management forecasting low single-digit growth driven by AI-enabled devices [3][7] - The automotive segment saw a remarkable 87% year-over-year revenue growth in Q3'24, with expectations for continued growth due to increased content per vehicle [4] - Industrial IoT is anticipated to experience low double-digit growth, supported by partnerships like the one with Aramco for advanced IoT solutions [4] Market Outlook - Qualcomm's management remains optimistic about the premium smartphone market, despite a flat overall handheld market forecast [3] - The company has extended its licensing agreement with Apple through 2027, which may enhance its position in the AI-enabled device market [3] - Despite challenges in the automotive and smartphone markets, Qualcomm expects to benefit from additional content per device and regional expansion, particularly in China [7] Valuation and Investment Perspective - Qualcomm shares are valued at $202.80/share based on a 21.32x eFY25 price/aEarnings multiple, with an upgrade to a BUY rating [1][11] - The company trades at a lower multiple compared to peers like AMD and Nvidia, which may limit short-term growth potential [9] - The stock is expected to retrace to around $150 before resuming growth, presenting a potential buying opportunity [13]

Core Viewpoint - Qualcomm's investment story remains strong despite recent stock pullback, driven by future growth in Automotive and AI PCs rather than current results [1][6] Financial Performance - For FQ3'24, Qualcomm reported a Non-GAAP EPS of $2.33, beating estimates by $0.07, and revenue of $9.39 billion, reflecting an 11.3% year-over-year increase [2] - Handset sales grew by 12%, while Automotive sales surged by 87% to reach $811 million [2] Market Opportunities - The IoT segment is poised for significant growth with the launch of AI PCs, which began in June [2] - Qualcomm's Copilot+ PCs powered by Snapdragon X series have been launched at 47 retailers across 20 devices, indicating strong market entry [2] - Qualcomm captured 20% of the PC market during the launch week, primarily due to long battery life [2] Future Projections - Qualcomm is guiding for FQ4 revenues potentially exceeding $10 billion, with expectations of substantial growth in Automotive and AI PC segments [2] - The company forecasts nearly $9 billion in combined business from Automotive and AI PCs, with an Automotive order book projected at $30 billion [2] - Automotive sales are expected to reach $2.8 billion in FY24, with projections of $4 billion in 2026 and $5 billion in 2027 [2] Valuation and Analyst Sentiment - Qualcomm's stock is currently trading at only 1.5 times FY25 EPS targets, indicating a low valuation relative to its growth potential [4] - Analysts have set a price target of $235 for Qualcomm, suggesting significant upside potential [5] Investment Strategy - The stock remains undervalued despite strong quarterly performance and positive guidance, presenting a buying opportunity for investors [6]

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About this content About Josh Lamb After graduating from the University of Kent in the summer of 2022 with a degree in History, Josh joined Proactive later that year as a journalist in the UK editorial team. Josh has reported on a range of areas whilst at Proactive, including energy companies during a time of global crisis, aviation and airlines as the sector recovers from the pandemic, as well as covering economic, social and governance issues. Read more About the publisher Proactive financial news and ...