Qualcomm Missed Guidance. Investors Are Rubbing It As They Wait For Data Centers To Take QCOM Stock Higher.
Qualcomm (QCOM) posted strong earnings but a weaker-than-expected outlook. In its second quarter, EPS of $2.65 beat nine cents. Revenue of $10.59 billion, down 3.6% year-over-year (YoY), was in line with estimates.
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Unfortunately, the company’s direction disappointed Wall Street. Management estimated third-quarter revenue of $9.2 billion to $10 billion (below estimates of $10.18 billion) and EPS between $2.10 and $2.30 (below estimates of $2.43). The weakness was not much of a mystery, as the company continues to face memory-chip shortages and as China has reduced manufacturing levels to adapt to soft market demand for smartphones.
At first, QCOM focused on news. But the negativity didn’t last long. In fact, since posting earnings on April 29, QCOM has exploded from around $152 to a recent high of $192.57 a share.
It Wasn’t the Quarter That Changed Investor Sentiment—It Was What Came Next
During the company’s phone call, CEO Cristiano Amon said Qualcomm will begin shipping data center chips for “hyper scalers” within the year, as noted by CNBC. Although the company did not disclose which company it is sending the chips to, it marks Qualcomm’s big push as far as AI infrastructure. In short, instead of focusing on the negative outlook, Wall Street shifted focus to Qualcomm’s potential role in the booming market for data center AI—one that could be worth an estimated $2 trillion by 2032, according to Markets and Markets.
Setting itself aside from companies that run AI training in data centers, Qualcomm is putting a lot of emphasis on using AI models properly, building on its strengths in mobile chips. Analysts at Wells Fargo added, “QCOM officially enters the custom silicon space following the acquisition of AlphaWave, notably announcing a design win with a large hyper scaler (ship starting in Dec qtr) that it believes can be a multi-channel interoperability. track,” as cited by Looking for an Alpha.
What Are Analysts Saying About QCOM Stock?
Qualcomm’s lack of direction would have been a huge selling point. But because of news of its future with AI data centers, Wall Street shrugged off its indifference. In addition to the AI data center news, CEO Amon also said that smartphone sales in China will decline in the current quarter because “customers are running out of supplies,” as quoted by. CNBC.
Of the 34 analysts covering Qualcomm stock, 10 have a “Strong Buy” rating, one has a “Neutral Buy” rating, 19 have a “Hold” rating, two have a “Neutral Sell” rating, and two have a “Strong Buy” rating. The average target price of $174.07 implies a potential downside of 10% from current levels. Meanwhile, the high-end target of $300 means a potential upside of 56% from here. While the company has missed direction and has headwinds on the horizon, investors seem to be more focused on where Qualcomm is headed than where it is today. Its push into AI-driven data centers is providing strong growth momentum.
At the date of publication, Ian Cooper had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
