To The Moon

Qualcomm’s outlook was really disappointing and more negative than market’s expectation, which lead to its share price falling 7% post-market trading. FY2Q23 Results in-line… Qualcomm's revenue was better than market’s expectations, thanks to strong flagship model launches. Revenue reached $9.3 billion, surpassing consensus estimate of $9.1 billion and within its prior guidance range of $9.2 to $10.0 billion. QCT revenue was $7.9 billion, exceeding consensus estimate of $7.7 billion and within guidance range of $7.7 to $8.3 billion. QTL revenue was $1.3 billion, falling short of consensus estimate of $1.4 billion and its guidance range of $1.45 to $1.65 billion. The QCT EBT margins were 26.5%, slightly missing the consensus estimate of 27.2% and its midpoint guidance range of 26% to 28%. On the other hand, QTL EBT margins were 67.5%, below consensus estimate of 68.4%, but within the guidance range of 71% to 75%. Finally, EPS were $2.15, meeting consensus estimate of $2.15, and falling within its guidance range of $2.05 to $2.25. But FY3Q23 guidance was a big miss… Qualcomm’s next quarter earnings guidance fell short by quite a lot due to lower revenue outlook for QCT due to inventory correction headwinds from both Apple and Android. Qualcomm guided the revenue to be between $8.1 billion and $8.9 billion, which was below consensus estimate of $9.3 billion. This included a projected QCT revenue of $6.9 billion to $7.5 billion, below consensus’s $7.8 billion, as well as a QTL revenue projection of $1.15 billion to $1.35 billion, below consensus’s $1.4 billion. The EPS guidance was $1.70 to $1.90, A LOT lower than consensus estimate of $2.20. Most investors would have already moderated their expectation for Qualcomm’s recovery, but the Company’s latest guidance provided for the June-Q (F3Q) and Sep-Q (F4Q) still failed to meet these lowered expectations. Inventory headwinds with Apple are exacerbating the already-fatigued Android market, making the outlook for a rebound in revenue murkier. While the inventory digestion in IoT has played out faster than expected, the headwinds in the Smartphone segment are delaying any signs of a recovery in revenue to the Dec-Q or F1Q24. Despite this, Qualcomm is managing to maintain its pricing discipline and keep QCT gross margins in the 48%-49% range. Qualcomm anticipates that its revenue from Android handsets will remain relatively stable q-o-q in June-Q. Furthermore, it expects that customers to continue to reduce their inventory for several quarters due to a sluggish end-demand recovery and a cautious macroeconomic outlook. Conclusion: Inexpensive valuation, but recovery delayed QCOM shares remain inexpensive, offering upside potential from both an earnings re-rating and earnings upsides from a recovery in the underlying market, but catalysts for this might be delayed due to the postponed recovery expectations. Nonetheless, though demand for mobile SoC appears to be recovering more slowly than anticipated, I believe that component inventory has already returned to normal after 3-4 quarters of destocking by the first half of 2023. @TigerStars @Daily_Discussion