Key Trends To Watch As Qualcomm Reports Q1 Results

by Trefis Team
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Qualcomm (NYSE:QCOM) is expected to publish its Q1 fiscal 2018 results on January 31. While we expect the company’s bread-and-butter technology licensing business to underperform on account of its ongoing litigation with its largest customer, Apple, the semiconductor business could drive earnings, on account of traction from Chinese OEMs as well as growth opportunities outside of mobile.

Trefis has a $60 price estimate for Qualcomm, which is below the current market price.

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Qualcomm has guided for 220 million to 240 million MSM chip shipments for the December quarter, marking a slight increase over the September quarter, with EBT margins for the QCT segment projected at between 18% – 20%, driven by a favorable product mix. We will be looking for updates on Qualcomm’s progress in the Chinese market, where it has gained traction in recent quarters (revenues were up 25% year-over-year during Q4’17) as Chinese OEMs increase their share in the global smartphone market. We will also be looking at Qualcomm’s chip operations beyond the mobile space in areas such as automotive, networking, and IoT. During the last quarter, Qualcomm said that its QCT revenues beyond smartphones stood at $3 billion in fiscal 2017, marking an increase of over 25% year-over-year.

Qualcomm also recently started commercial deployment of its first ARM-based server processor called the Centriq 2400, as it looks to challenge Intel’s dominance in the market for data center processors. The company is touting lower costs and better energy efficiency as the two key selling points of the new processor. The conditions in the server market may also be conducive to Qualcomm’s entry. Intel practically controls the entire market for server processors (over 99% share), giving it significant pricing power. However, data center operators have been seeking a competitive alternative to Intel, that would give them more choice while driving prices lower and boosting innovation and Qualcomm has seen interest from cloud computing giants such as Google and Microsoft. We will be looking for updates on how this new business is faring.

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