Qualcomm: Expect Strong Earnings Performance in FQ4, Says Top Analyst

The semiconductor industry has been at the mercy of macro developments and the US election results are likely to affect the many companies whose business interests lie both in the West and East.

Qualcomm (QCOM) is one such company. The world’ largest mobile chipmaker will deliver F4Q20 results today after market close, and will hope to emulate the previous quarter’s outstanding performance.

Deutsche Bank analyst Ross Seymore expects Qualcomm to benefit from “the beginning of 5G iPhone ramps and positive handset seasonality,” and anticipates another strong report.

The analyst expects F4Q revenue to increase by 22% from the previous quarter to $5.9 billion, which is in-line with the Street’s forecast and roughly at the mid-point of the guidance range of $5.5-6.3 billion.

Additionally, given Qualcomm’s history of providing conservative PF EPS guidance – barring one quarter  since F3Q17, the company has either met or beat its PF EPS guidance range – Seymore “would not be surprised” if F4Q PF EPS came in above the top end of the guidance range’s $1.25 on “better GMs/ lower opex.”

Seymore also believes the chip maker will raise its CY20 5G global handset shipment forecast to 225 million – the top end of its 175-225 million guidance range – and expects the strong performance to continue into next year.

“Overall,” the 5-star analyst summed up, “QCOM remains well positioned to see further revenue acceleration in FY21E driven by the ramp of 5G devices and corresponding content gains (modem+RFFE), y/y growth in QTL (DBe FY21 QTL revs +12% y/y) as all major handset OEMs are now paying royalties, with operating leverage improving on higher volumes/cost controls. Consequently we continue to believe that QCOM is well positioned to benefit as the leader in the 5G modem/RFFE market, delivering upside to Street rev/EPS estimates, and a shrinking valuation discount vs. large cap semi peers (DB CY21E P/E of ~19x for QCOM vs large cap peers at ~24x).”

Accordingly, Seymore reiterated a Buy on QCOM shares along with a $127 price target. There’s modest upside of 3% from current levels. (To watch Seymore’s track record, click here)

Qualcomm has robust support amongst Seymore’s colleagues. Based on 14 Buys and 3 Holds, the analyst consensus rates the stock a Strong Buy. At $137.6, the average price target suggests upside of ~6%. (See Qualcomm stock analysis on TipRanks)

To find good ideas for tech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.