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Qualcomm Posts Q2 Earnings Results, Gives Q3 Guidance

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Apr. 30 2020, Published 8:17 a.m. ET

Qualcomm (NASDAQ:QCOM) posted its financial results for the second quarter of fiscal 2020 (quarter ended March) on April 29 after the market bell. The stock rose 3% in after-hours trading on Wednesday. The company beat the top and bottom-line estimates in the second quarter.

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Qualcomm’s Q2 earnings

Qualcomm generated revenue of $5.21 billion—an increase of 6.6% from the second quarter of fiscal 2019. The technology company beat Wall Street analysts’ consensus revenue estimate of $5.03 billion. The company posted an adjusted net profit of $1.02 billion during the quarter—an 8.9% rise YoY (year-over-year). In the second quarter, Qualcomm reported an adjusted EPS of $0.88 compared to $0.77 in the second quarter of fiscal 2019. The earnings beat analysts’ consensus estimate of $0.78 per share.

The revenue from Qualcomm’s QTL (Qualcomm Technology Licensing) unit fell 4.5% YoY to $1.07 billion. Meanwhile, the revenue from Qualcomm’s QCT (Qualcomm CDMA Technologies) unit rose 10.2% YoY to $4.1 billion. In the second quarter, MSM (mobile station modem) chip shipments fell 16.8% YoY to 129 million.

According to a CNBC report, “Qualcomm said that the coronavirus pandemic reduced demand for phones in the second quarter about 21% compared to its previous expectations and on a year-over-year basis, primarily driven by China.” The report also said, “It also warned of lower phone shipments in the quarter ending in June, as the pandemic has chilled non-China economies around the world.”

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Qualcomm’s Q3 guidance

Qualcomm has given a revenue guidance of $4.4 billion–$5.2 billion for the third quarter. The company also forecasts QTL revenues of $750 million–$950 million and QCT revenues of $3.6 billion–$4.2 billion. In the third quarter, MSM chip shipments could be between 125 million and 145 million. Analysts expect third-quarter revenues of $4.86 billion—down 0.7% YoY.

Qualcomm expects its third-quarter non-GAAP EPS to be $0.60–$0.80. Analysts expect a third-quarter adjusted EPS of $0.73—down 8.2% YoY.

The semiconductor company has kept its outlook for 5G global handset shipments of 175 million–225 million in calendar year 2020.

Peer comparison

In the first quarter, Intel (NASDAQ:INTC) generated revenue of $19.8 billion—an increase of 23.5% YoY. The company posted an adjusted EPS of $1.45—more than analysts’ consensus estimate of $1.28. Notably, the company’s adjusted EPS rose 62.9% YoY in the first quarter. Read Is Intel Stock a ‘Sell’ after Its Q1 Earnings? to learn more.

In the first quarter, Advanced Micro Devices (NYSE:AMD) posted revenues of $1.79 billion, which implies a rise of 40.4% YoY. Also, the company reported an adjusted EPS of $0.18 in the first quarter, which implies a rise of 200% YoY. Wall Street expected the technology company to report an adjusted EPS of $0.18 on revenue of $1.78 billion. Read Is AMD Stock a ‘Sell’ after Its Q1 Earnings? to learn more.

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Qualcomm’s target price

Qualcomm stock is covered by 32 Wall Street analysts. Among the analysts, 20 recommend a “buy,” two recommend a “sell,” and ten recommend a “hold.” Analysts’ mean target price on the stock is $90.45, which implies a 14.5% gain from the current level of $78.97. The consensus target price for the stock has fallen from $93.86 in March—a fall of 3.6%.

After the second-quarter earnings results, Deutsche Bank increased its target price on Qualcomm stock from $85 to $90. Canaccord Genuity increased its target price on the stock from $95 to $102. However, Mizuho decreased its target price on the stock from $95 to $91.

Technical level

Qualcomm stock rose 4.9% on Wednesday and closed at $78.97 with a market capitalization of $90.3 billion. The stock was trading 17.9% below its 52-week high of $96.17. Meanwhile, the stock was trading 36.2% above its 52-week low of $58.00.

Based on the closing price on Wednesday, Qualcomm stock was trading 7.5% above its 20-day moving average of $73.43. The stock is also trading 7.2% above its 50-day moving average of $73.67 and 2.8% below its 100-day moving average of $81.24. Qualcomm’s 14-day relative strength index score is 59. The score implies that the stock isn’t oversold or overbought.

Qualcomm’s free cash flow increased by 18.3% YoY to $738 million in the second quarter of fiscal 2020. The company’s cash flow from operations rose 36.4% YoY to $1.08 billion.

Qualcomm returned $705 million to shareholders in the form of dividends in the second quarter of fiscal 2020. On Wednesday, the company’s dividend yield was 3.29%. Intel’s dividend yield was 2.14% on the same day.

On Wednesday, the Dow Jones Industrial Average and the S&P 500 rose by 2.2% and 2.7%, respectively. Intel and AMD returned 5.2% and -3.3%, respectively, on the same day.

Read Google Increases Custom Chip Efforts, Puts Qualcomm on Notice to learn more.

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