Qualcomm's Guidance 'Shockingly Bad' But Here's Why This Analyst Sees Himself As 'Buyer' Of The Stock

Shares of chipmaker Qualcomm Inc. QCOM fell steeply in after-hours trading on Wednesday following the release of its fiscal year, fourth-quarter results.

What Happened: KeyBanc Capital Markets analyst John Vinh maintained an Outperform rating for Qualcomm shares and reduced the price target from $170 to $150.

Qualcomm’s fourth quarter results of $11.4 billion in revenue and earnings per share of $3.13 were in line with consensus, Vinh said in a note.

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The company guided first-quarter revenue to $9.6 billion, below the consensus of $12 billion, and EPS to $2.35, notably below the $3.42 consensus estimate, the analyst said. Terming the guidance as “shockingly bad,” Vinh said it reflected weak smartphone sell-through compounded by OEMs drawing down buffer inventories to pre-pandemic norms.

Channel inventory drawdown, according to the analyst, will have a $2 billion revenue impact and $0.80 EPS impact. The company expects over 50% of inventory drawdown to be completed in the first quarter but sees weakness continuing through the fiscal year 2023, Vinh added.

He noted that the company lowered its 2022 handset forecast from a mid-single-digit decline to a low-double-digit decline, with 5G units estimated at 625 million compared to 675 million estimated earlier.

Qualcomm said it expects 100% of the 5G modem share for the iPhone 15 compared to the previous estimate of 20%, Vinh said.

Apple Inc.’s AAPL contribution will taper off to a minimum by the fiscal year 2025, Vinh added.

“While we view these results as disappointing, we are buyers as we see favorable risk/reward with forward ests derisked,” Vinh said.

Price Action: Qualcomm shares plummeted 7.56% to $104 in after-hours trading on Wednesday, according to Benzinga Pro data.

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