[Overseas Stocks Spotlight] "Qualcomm Expected to Rally by Year-End Due to 5G Smartphone Expansion"

[Asia Economy Reporter Eunmo Koo] KB Securities analyzed that Qualcomm (QCOM US) is expected to have a year-end rally due to the spread of 5G smartphones.

Qualcomm recorded adjusted revenue of $6.5 billion and adjusted earnings per share (EPS) of $1.45 in the fourth quarter of fiscal year 2020 (July to September 2020). Revenue and EPS surged 36% and 76% respectively compared to the same period last year, achieving strong performance despite the impact of COVID-19, exceeding consensus estimates (adjusted revenue of $5.93 billion, EPS of $1.17) by 10% and 24% respectively.

The launch of the iPhone 12 is expected to be reflected in the first quarter of fiscal year 2021 (October to December 2020). On the 7th, KB Securities researcher Asim Hussein explained in a report, “Consumers who decided to purchase the iPhone 12 between July and September will actually buy the product in the first quarter (October to December 2020) when it is released, so Apple’s profit realization is only deferred, not lost.” Apple’s management expressed optimistic prospects regarding iPhone 12 sales during the earnings conference call for the fourth quarter (July to September 2020).

Sales related to Huawei are also evaluated as potentially contributing to performance growth. Researcher Hussein stated, “If the tough stance against China weakens after the U.S. presidential election and 5G modem sales are reapproved, exceeding guidance is expected.” The U.S. government approved some exports to China by Intel in September and approved Sony’s exports to China in October. In this fourth quarter, Qualcomm reflected $1.8 billion in overdue patent royalties from Huawei in its revenue. Meanwhile, Hussein added, “Although the U.S. government banned chip sales to Huawei by domestic companies such as Qualcomm, Chinese companies can still use U.S. patents.”

Going forward, as sales of Internet of Things (IoT) devices and electric vehicles increase, the proportion of non-smartphone sales is expected to rise. Researcher Hussein explained, “In fiscal year 2019 (October 2019 to September 2020), semiconductor sales to non-smartphone customers such as automakers and home appliances amounted to $3.67 billion,” adding, “The overall sales proportion of other sectors excluding smartphones rose to an all-time high of 15%.”

This content was produced with the assistance of AI translation services.