Analyst Ratings Coverage
Recently, the investment firm, STA Research (Rank#93), lowered its 12 month target price on Qualcomm, the leading manufacturer of semiconductors and telecommunications equipment. The reason behind this decision was Qualcomm’s weak guidance, which was attributed to the continuously declining demand for smartphones in the market. STA Research cut the target to $88 per share from $130, and downgraded the stock to “Underperform” from a “Buy” as a consequence of the poor outlook.
According to Qualcomm’s earnings report today, May 3rd, the company’s revenue was $7.9 billion, up 52% year-over-year. However, despite this significant increase in revenue, the company provided weak guidance for the upcoming quarter. Qualcomm’s CEO, Cristiano Amon, stated that the company’s guidance was due to the ongoing shortage of semiconductor chips, which has led to a decline in smartphone demand.
The global macro concerns and inflationary pressure has had a significant impact on the demand for smartphones, with many individuals prioritizing other expenses due to financial constraints. Moreover, the ongoing chip shortage has led to increased prices for smartphones, further decreasing demand. As a result, Qualcomm’s outlook has been negatively affected, with the company expecting lower revenue growth for the next quarter.
STA Research’s decision to lower Qualcomm’s target price to $88 from $130 is based on the given the current market conditions. The investment firm has cited the ongoing chip shortage and the lack of demand for smartphones as the primary reasons behind its decision. The firm also has stated that Qualcomm’s dependence on the smartphone market could lead to a decline in the company’s revenue if demand does not improve.
Qualcomm’s QCT (Qualcomm CDMA Technologies) segment, which is responsible for the majority of the company’s revenue, is heavily reliant on smartphone sales. If the demand for smartphones does not improve, Qualcomm’s revenue growth could be impacted, as the ongoing chip shortage has made it difficult for the company to meet the demand for its products, leading to potential supply chain disruptions.
It’s also important to note that these challenges are a industry wide issue. The chip shortage has impacted several industries, and many companies are struggling to meet the demand for their products. Moreover, the smartphone market has always been highly competitive, with companies constantly striving to innovate and stay ahead of the curve.
STA Research to lower Qualcomm’s target price , and downgrade the rating, is a reflection of the current market conditions among the declining demand. However, it’s important to note that the company has a strong track record of innovation and resilience. While the current market conditions may be challenging, Qualcomm’s historically has had the ability to adapt and innovate could lead to future growth opportunities.