“Qualcomm Inc. parlayed the global 5G rollout and Apple Inc.’s inclusion of its chips in the latest iPhone models into an earnings jump that failed to satisfy investors betting phone-chip sales would be even higher,” WSJ writes.
Numbers To Consider:
- Quarterly Sales: $8.24 Billion (+62%)
- Net Income: $2.46 Billion (More Than Doubled)
- Current Quarterly Sales Outlook: Between $7.2 Billion and $8 Billion
Change In The Wind: It’s a set of strong results leading up to Qualcomm’s big leadership transition. CEO Steve Mollenkopf is retiring this summer and company president Cristiano Amon has been tapped to replace him.
How Qualcomm Works: The company is split into two sides — one that makes the chips and another that licenses them.
- Sales on the chip-making side improved by 81% while licensing revenue grew 18%.
- Qualcomm also saw growth in “newer parts of its chip business,” eclipsing more than $1 billion in quarterly sales of chips that go into IoT devices and “dedicated circuitry that handles communications with cell towers.
Looking Ahead: “Qualcomm is also grappling with a broader problem affecting the chip industry: supply shortages. Those may limit Qualcomm’s ability to fully capitalize on strong demand for phones and other devices, especially as the broader economy rebounds from the pandemic downturn with the rollout of vaccines.”
- “Demand is far exceeding supply right now, which is something I think is going to be normalized over the next several quarters,” Mollenkopf said.
Interestingly enough, Qualcomm ($QCOM) is down almost 7% in pre-market trading. Their revenue growth is generally flat until they see big spikes from mobile communications refreshes or upgrade cycles like this iPhone one. They are trading for around 16x forward EBITDA with about a 5% free cash flow yield.
Before the Tech Stock Inflation of 2020, $QCOM was a very sleepy stock, hovering between $50 and $80 per share. An investment in $QCOM definitely depends on whether you believe there will be a huge 5G adoption rush soon, as $QCOM is a big technology provider for 5G.