By Senad Karaahmetovic
Shares of Qualcomm (NASDAQ:QCOM) are trading more than 8% lower in pre-market Thursday after the chipmaker issued a weaker-than-expected forecast to reflect slowing demand for smartphones.
Qualcomm reported a Q4 EPS of $3.13 on revenue of $11.39 billion, which compares to the consensus of $3.15 on sales of $11.35 billion. The company's biggest division by revenue generated, Handsets, saw its revenue increase 40% year-over-year to $6.57 billion.
For this quarter, Qualcomm expects Q1 EPS between $2.25 and $2.45, a big miss compared to the consensus of $3.42. Revenue is seen between $9.2 billion and $10 billion, again missing the $12 billion consensus.
"The rapid deterioration in demand and easing of supply constraints across the semiconductor industry have resulted in elevated channel inventory. Due to these elevated levels, our largest customers are now drawing down on their inventory, negatively impacting the mid-point of our EPS guidance for the first quarter of fiscal 2023 by approximately ($0.80). This is the primary driver of the variance relative to our prior expectations," Qualcomm explained in a statement.
"While our financial outlook is being temporarily impacted by elevated channel inventory, our diversification strategy and long-term opportunities remain unchanged," CEO Cristiano Amon said.
Raymond James analysts said Qualcomm delivered "another hard reset" quarter. The analysts cut the price target to $150 from $190 per share.
"We got the hard reset that we believe investors were hoping for, but not out of an abundance of caution – but rather because demand from their largest handset customers rapidly deteriorated… With near-term expectations largely de-risked (in our view), and continued traction in longer-term secular growth areas, our longer-term thesis remains unchanged," the analysts said.
Morgan Stanley analysts cut the price target to $126 from $147 per share.
"While numbers YTD have been solid, it has been increasingly obvious that there would be an inventory correction - we cut numbers on that basis in our preview, and the selloff in the stock speaks to investor concerns about near term numbers. The magnitude of the shortfall was much more severe than our expectations, which is in some ways a positive," the analysts wrote to clients.