Qualcomm Avoids Supply Chain Disruptions, Both Earnings and Stock Perform Well

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Minji Lee] Qualcomm recorded earnings that exceeded market expectations in the third quarter, and it is predicted to continue its earnings improvement trend by proactively responding to supply chain disruptions.

According to the financial investment industry on the 6th, Qualcomm's stock price rose 27.43% over the past month to $163.19. This is interpreted as the stock price reflecting expectations of continued solid earnings.

In the fourth quarter (July to September), excluding one-time costs and acquisition impacts, Qualcomm posted revenue and EPS of $9.32 billion and $2.55 respectively, representing growth of 43% and 76% compared to the same period last year. These figures surpassed market expectations by 5% and 13%, respectively.

Chip design (QCT) revenue reached $7.73 billion, a 56% increase from the same period last year. By segment, the handset division recorded $4.69 billion, growing 56%, RF Front-End (RFFE) $1.24 billion, automotive $270 million, and IoT $1.54 billion, increasing by 45%, 44%, and 66%, respectively. Hyungtae Kim, a researcher at Shinhan Financial Investment, said, “Strong demand across the entire front-end business drove the earnings growth, and the growth previously concentrated in the handset segment is diversifying, making a full-scale structural improvement visible.”

License (QTL) revenue was $1.56 billion, a 3% increase from the same period last year. With over 150 long-term 5G license agreements currently signed, the rapid increase in high-speed network construction and edge computing demand across industries is expected to make this a cash cow for the company in the future.

Qualcomm proactively addressed the mobile AP supply shortage issue in the second half of the year, boosting its market share. Yuak Park, a researcher at Kiwoom Securities, analyzed, “If supply volume had been secured across the industry, the trend of front-end demand would have been different. Qualcomm responded to the supply shortage issue by multi-sourcing components and increasing production capacity, and these efforts are expected to take effect from the end of this year.” The mobile AP supply shortage issue is showing signs of improvement from the end of the year and is expected to balance supply and demand around the second half of next year.

The company’s first-quarter revenue guidance is $10.4 billion, exceeding market expectations by 6.5%. By segment, QCT revenue is expected to be $8.65 billion, and QTL revenue $1.7 billion, with profitability predicted to improve by 1?2 percentage points and 2?6 percentage points, respectively. The company identified component supply shortages early and diversified its supply chain, which is expected to drive the earnings growth trend. Researcher Kim explained, “Compared to competitors, Qualcomm has a 40% higher margin, and the proportion of non-handset businesses is expected to expand to 38%, with a significant increase in annual 5G phone shipments.”

The outlook for the stock price was also presented positively. Currently, the company’s 12-month forward price-to-earnings ratio (PER) is 15 times, lower than the pre-COVID-19 level of 21 times. Researcher Kim stated, “Superior profitability and a successful business diversification strategy have been confirmed, so concerns about growth slowdown are expected to be dispelled.”

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