Qualcomm Stock Drops After Forecast Fails, CEO Says Inventory Issues Will Persist
Shares of Qualcomm Inc. fell in Thursday’s extended session after the chipmaker expected the inventory selloff to persist in the first half of the year, sending the chip company’s outlook just below consensus of Wall Street.
Qualcomm QCOM,
shares, which had initially gained 3% after hours, fell early in the company’s earnings call, ending the extended session down 3%. The stock closed the regular session down 1.9% at $135.85.
On the call with analysts, Qualcomm executives said weaker-than-expected handset demand and shrinking inventory were major headwinds and forecast inventory selloff to persist in the first half of 2023, which would have an impact on the results.
Qualcomm is forecasting adjusted earnings of $2.05 to $2.25 per share on revenue of $8.7 billion to $9.5 billion for the fiscal second quarter. Analysts had estimated earnings of $2.29 per share on revenue of $9.56 billion for the second quarter.
The company reported first-quarter net income of $2.24 billion, or $1.98 per share, compared with $3.4 billion, or $2.98 per share, a year ago. The chipmaker reported adjusted earnings, which exclude stock-based compensation expense and other items, of $2.37 per share, compared with $3.23 per share in the same period last year. . Total revenue for the quarter fell to $9.46 billion from $10.7 billion a year ago.
Analysts polled by FactSet had forecast $2.36 per share on revenue of $9.6 billion, based on Qualcomm’s forecast of $2.25 to $2.45 per share on revenue of $9.2 to $10 billion.
Handset sales fell 18% to $5.75 billion, auto sales jumped 58% to $456 million and Internet of Things sales rose 7% to 1.68 billion, the company said.
Akash Palkhiwala, chief financial officer of Qualcomm, told analysts that weak handset demand and drawdowns on OEM inventory were acting as a significant handset headwind, while inventory issues appear to be easing. be propagated to IoT products.
“We also saw IoT having the same, some of the characteristics, and we see a combination of these factors impacting how long the withdrawal lasts,” Palkhiwala said.
“Again, in our view, this is a more short-term thing,” Palkhiwala said. “The withdrawal does not affect the strength of the company. As the recovery progresses, we will be able to take advantage of this.
“From a product and technology perspective, we believe we are in the strongest position in our history,” Qualcomm chief executive Cristiano Amon told analysts on the call, adding that the plan long-term outlook remains unchanged.
Last quarter, Qualcomm’s share price fell to levels not seen in more than two years after executives said there was up to 10 weeks of inventory in the channel and forecast a shortage. to earn $2 billion after record sales.
And the glut doesn’t seem to bode well for the mobile phone industry, as research firm Gartner recently predicted that global mobile phone shipments would drop 4% to 1.34 billion units in 2023, after an 11% drop in 2022.
Read: The world is buying fewer devices and inventories of PCs, phones and tablets are piling up
Inventory issues have become a visible blight on the industry after a two-year shortage caused by the COVID pandemic quickly turned into a glut in 2022, Intel Corp earnings reports show. . INTC,
and Advanced Micro Devices Inc. AMD,
Qualcomm shares fell 39.9% in 2022, while the PHLX Semiconductor Index SOX,
fell 35.8%, the S&P 500 SPX index,
ended the year down 19.4%, and the tech-heavy Nasdaq COMP composite index
lose 33.1%.
In January, however, markets rallied and shares of Qualcomm jumped 21.2%, while the SOX index gained 15.4%, the S&P 500 gained 6.2% and the Nasdaq rose. by 10.7%.
Qualcomm Stock Drops After Forecast Fails, CEO Says Inventory Issues Will Persist
