Inflexion point for smartphone segment in sight?
- Q4FY23 results beat, on better than expected showing across major operating segments
- Q1FY24 guidance above expectations, with fresh orders coming in after the end of destocking cycle
- Maintain HOLD while we watch closely for further positive improvements
Latest results and guidance above expectations. QCOM delivered a strong set of Q4FY23 results that exceeded its prior guidance and analysts’ estimates. Revenue came in at US$8.7bn (est. US$8.5bn) with adjusted EPS of US$2.02 (est. US$1.91) on better-than-expected showing across major operating segments. The smartphone segment was a notable standout, as easing smartphone slump especially in China propped 4Q23 segmental revenue to US$5.46bn (est. US$5.34bn). Automotive revenue grew 23% sequentially to $535m, marking the 12th consecutive quarter of double-digit percentage growth on a year-over-year basis. Management’s midpoint guidance for Q1FY24 revenue and EPS were also above expectations, at US$9.5bn (est. US$9.2bn) and US$2.35 (US$2.23), respectively, noting that fresh orders are starting to come in with smartphone destocking cycle largely done.
HOLD while we watch closely for further positive improvements. We see the latest results and management Q1FY24 guidance as positives signals for improvements going forward. That said, we think our HOLD recommendation is justified at this point, as we watch closely for further positive developments in its smartphone segment and contribution from China. Apart from the extension of Apple-partnership that ensures earnings visibility, the outcomes from the multiple growth-initiatives also bear watching: 1) collaboration with luxury automakers for auto chips, and 2) recently announced venture into the PC chips market. Maintain HOLD with TP US$122.70.