Qualcomm Incorporated QCOM is scheduled to report third-quarter fiscal 2024 earnings on Jul 31. The Zacks Consensus Estimate for revenues and earnings is pegged at $9.19 billion and $2.25 per share, respectively. Earnings estimates for QCOM have improved from $9.58 per share to $9.89 for 2024 and from $10.48 per share to $10.96 for 2025 over the past 90 days.
QCOM Estimate Trend
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Earnings Surprise History
The chip manufacturer delivered a four-quarter earnings surprise of 7.5%, on average, beating estimates on each occasion. In the last reported quarter, the company pulled off an earnings surprise of 6.1%.
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Earnings Whispers
Our proven model does not predict an earnings beat for Qualcomm for the fiscal third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Qualcomm currently has an ESP of 0.00% with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping the Upcoming Results
With the accelerated rollout of 5G technology, Qualcomm is benefiting from investments toward building a licensing program in mobile. The company is well-positioned to meet its long-term revenue targets driven by solid 5G traction, greater visibility and a diversified revenue stream.
Qualcomm is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor company for the intelligent edge. It 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. Qualcomm believes it is on track to become the largest smartphone RF front-end supplier by revenue in the near future.
The company intends to harness artificial intelligence to meet increased demands for essential products and services that are the building blocks of digital transformation in a cloud economy. Qualcomm envisions solid growth opportunities within the mobile space, driven by the strength of its Snapdragon portfolio.
During the fiscal third quarter, Qualcomm partnered with Google to release an optimized Chrome browser designed for Windows PCs powered by Snapdragon. The launch of an improved iteration of Chrome precedes the expected release of Snapdragon X Elite compute platforms in mid-2024. These advancements will empower Windows PC users with access to significantly faster web browsing capabilities. These initiatives are likely to be reflected in the upcoming results.
Price Performance
Over the past year, Qualcomm has gained 36.2% compared with the industry’s growth of 31.4%, outperforming peers like Hewlett Packard Enterprise Company HPE, but lagging Broadcom Inc. AVGO.
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Key Valuation Metric
From a valuation standpoint, Qualcomm appears to be relatively cheaper compared to the industry and below its mean. Going by the price/earnings ratio, the company shares currently trade at 16.72 forward earnings, lower than 21.79 for the industry and the stock’s mean of 17.57.
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Investment Considerations
Qualcomm is one of the largest manufacturers of wireless chipset based on baseband technology. The company is focusing on retaining its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches. It is likely to help users experience a seamless transition to superfast 5G networks, delivering low-power resilient multi-gigabit connectivity with unprecedented range and Qualcomm's best-in-class security. This, in turn, offers the flexibility and scalability needed for broad and fast 5G adoption through accelerated commercialization by OEMs.
The company is reportedly the only chipset vendor with 5G system-level solutions spanning both sub-6 and millimeter wave bands and one of the largest RF (radio frequency) front-end suppliers with design wins across all premium-tier smartphone customers. Leveraging the technology roadmap for a focused approach to innovation, it aims to connect millions of devices to the ‘connected intelligent edge.’
In addition, solid growth opportunities within the mobile space led by innovations in the Snapdragon portfolio for premium-tier Android handsets and a firmer footing in the emerging market of driver-assistance technology with the Snapdragon Ride Advanced Driver Assistance Systems portfolio are tailwinds.
End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, Qualcomm appears to be a solid investment proposition. It also looks cheaper relative to its valuation metrics. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. With improving earnings estimates, the stock is witnessing a positive investor perception.
Riding on a robust earnings surprise history and favorable Zacks Rank, it appears primed to come up trumps in the ensuing earnings. Hence, investors are likely to profit if they bet on this high-flying stock now.
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