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Is Qualcomm Set for a Big Jump in Short Term After Earnings This Week?
QUALCOMM Inc. QCOM is a global leader in the fabless semiconductor space, focusing on 5G mobile network technology. QCOM is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor firm for the intelligent edge.
QUALCOMM operates through three segments — QCT (QUALCOMM CDMA Technologies), QTL (QUALCOMM Technology Licensing) and QSI (QUALCOMM Strategic Initiatives). The tech giant is set to release its fourth-quarter fiscal 2024 earnings results on Nov. 6, after the closing bell. The stock currently carries a Zacks Rank #2 (Buy) and has an Earnings ESP of +0.48%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better (Rank #1 or 2) and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
QCOM is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor firm for the intelligent edge. With the accelerated rollout of 5G technology, QCOM has been benefiting from investments toward building a licensing program in mobile.
Solid Earnings Estimate Revisions for QCOM Shares
For fourth-quarter fiscal 2024, the Zacks Consensus Estimate for revenues is pegged at $9.90 billion, suggesting an improvement of 14.7% year over year. The consensus mark for adjusted earnings per share (EPS) is $2.56, indicating an appreciation of 26.7% year over year. The company delivered positive earnings surprises in the last four reported quarters with the average beat being 7.6%.
Moreover, QCOM has witnessed positive earnings estimate revisions for fiscal 2025 (ending September 2025) in the past 60 days. At present, the Zacks Consensus Estimate indicates a year-over-year increase of 8.2% and 8.4%, respectively, for revenues and EPS in fiscal 2025.
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Factors to be Considered for the Fourth Quarter
Based on the collective assessment of analysts, Revenue- QCT- Handsets should arrive at $6.15 billion. The estimate indicates year-over-year growth of 12.8%. The collective assessment of analysts points to an estimated Revenue- QCT- IoT of $1.47 billion. The estimate indicates a year-over-year increase of 6.4%.
Analysts expect Revenue- QCT- Automotive to come in at $791.51 million. The estimate suggests an increase of 48% year over year. The average prediction of analysts’ places Revenue- QCT at $8.42 billion. The estimate indicates year-over-year growth of 14.1%.
The consensus among analysts is that Revenue- QTL will reach $1.44 billion. The estimate indicates a rise of 14.3% from the prior year quarter. The consensus estimate for Revenues- Non-GAAP Reconciling Items stands at $44.71 million. The estimate indicates a year-over-year rise of 54.2%.
It is projected by analysts that Revenues- Equipment and services will reach $8.36 billion. The estimate points to an increase of 14.7% from the year-ago quarter. According to the collective judgment of analysts, Revenues- Licensing should come in at $1.49 billion. The estimate suggests growth of 11.2% year over year.
The combined assessment of analysts suggests that 'Income before taxes- QTL' will likely reach $1.04 billion. Compared to the present estimate, the company reported $829 million in the same quarter last year. Analysts' assessment points toward Income before taxes- QCT of $2.35 billion. The estimate is in contrast to the year-ago figure of $1.89 billion.
Major Catalysts
QUALCOMM has formed a multi-year technology collaboration with Alphabet Inc. GOOGL to develop generative artificial intelligence (AI) digital cockpit Solutions and accelerate digital transformation in the automotive sector. QCOM also introduced Snapdragon Cockpit Elite platform to improve in-vehicle digital experience and Snapdragon Ride Elite platform to power automated driving.
These latest additions to the Snapdragon Digital Chassis Solution portfolio are gaining significant market traction. Major car manufacturers such as Mercedes-Benz AG and Li Auto have already opted to deploy these solutions in their next-generation vehicles.
QUALCOMM is witnessing healthy traction in EDGE networking that helps to transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets.
The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are also fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification.
QCOM is witnessing increasing demand for high-end chipsets such as AI-optimized Snapdragon 8 Gen 3 chips. These chips include features like enhancing voice assistants and image generation.
Investors will also keenly watch any updates on Qualcomm’s latest Snapdragon X PC chips. Microsoft Corp. MSFT and other Windows PC players have already announced new computers with AI features using these latest QCOM processors.
Attractive Valuation for QCOM Stock
QUALCOMM belongs to the Zacks Defined Computer and Technology – Wireless Equipment Industry, which is currently in the top 40% of the Zacks Industry Rank. Since it is ranked in the top half of Zacks Ranked Industries, we expect the Computer Storage Devices industry to outperform the market over the next 3 to 6 months.
Nevertheless, QCOM’s stock price has underperformed the broad-market index—the S&P 500 — year to date. The chart below shows QCOM's price performance year to date.
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Meanwhile, QCOM is currently trading at an attractive valuation compared to its peers. The stock has a forward price/earnings (P/E) of 15.12X, below the industry’s P/E of 15.99X and the S&P 500’s P/E of 19.15X. The company has a return on equity (ROE) of 38.12% compared with the S&P 500’s ROE of 16.78% and the industry’s ROE of a mere 8.32%.
Robust Short-Term Upside Left for QCOM Shares
The average short-term price target of brokerage firms represents an increase of 30.6% from the last closing price of $165.27. The brokerage target price is currently in the range of $160-$270. This indicates a maximum upside of 63.4% and a maximum downside of a mere 3.2%.
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