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Will Higher Chip Revenues Aid Qualcomm (QCOM) Q1 Earnings?
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Qualcomm Incorporated (QCOM - Free Report) is scheduled to report first-quarter fiscal 2021 results on Feb 3, after the closing bell. In the fiscal first quarter, it is likely to have recorded a stellar growth in revenues from the Qualcomm CDMA Technologies (“QCT”) segment owing to resumption of chip supply to China-based firms and wide proliferation of 5G-enabled devices.
Factors at Play
The QCT segment includes CDMA-based integrated circuit devices (chips) that are used mainly in smartphones, wireless data access cards and infrastructure equipment, and system software for wireless voice and data communications and GPS products.
During the fiscal first quarter, Qualcomm secured green signal from the Trump administration to restore supply of 4G chips to China-based Huawei Technologies, paving its way to provide some key raw materials for 4G mobile devices despite stringent U.S. trade restrictions. Notably, the company primarily used to supply chips for Huawei’s low-priced models as the China-based firm utilized indigenously developed chips for its flagship models. The resumption of chip supply is likely to have translated into incremental revenues for the company in the quarter under review.
In the fiscal first quarter, Qualcomm collaborated with Great Wall Motor Company Limited to provide the China-based automobile manufacturer with its much-acclaimed Snapdragon Ride Platform. The Snapdragon Ride Platform is equipped with high-end computer vision engines and Graphics Processing Unit that support multiple segments of autonomous driving. The company joined forces with DISH Network to assist it with the deployment of 5G network on the back of open and cloud-based solutions. It is likely to fast-track the commercialization of Virtualized RAN with the deployment of scalable 5G networks in the competitive North American market. Qualcomm also facilitated the deployment of 5G millimeter Wave network at South Korea’s Kumoh National Institute of Technology in collaboration with LG Uplus and LG Electronics. These initiatives, directed at bolstering the commercialization of 5G mmWave globally, are likely to have contributed to higher segment revenues in the to-be-reported quarter.
Moreover, Qualcomm partnered with Ericsson, Swisscom and handset maker — Oppo — to execute live 5G Voice over New Radio and data calls over a commercial 5G Standalone network. The groundbreaking test leveraged Qualcomm’s Snapdragon X60 5G Modem-RF System and was primarily focused on providing a streamlined 5G network while creating lucrative opportunities for operators with an enhanced customer experience. Meanwhile, the 5G carrier aggregation milestone was made possible with Snapdragon 888 5G Mobile Platform. Such technology collaborations are likely to have boosted the top-line growth of the segment.
However, the company expects an impact on device shipment due to the lengthening of handset replacement rates stemming from the adverse economic impact of the coronavirus pandemic. This, in turn, is likely to have affected unit volumes to some extent.
Q1 Developments
During the quarter, Qualcomm suffered a setback when certain media reports revealed that Apple is developing its own modem for its future devices. Qualcomm modems have been a key feature in the latest iPhone models, connecting the device to cellular networks for fast web browsing and instant app access. Built on indigenous technology that requires specialized engineering expertise and broad industry know-how, these modems have been the hallmark of impeccable performance standards. According to industry grapevines, Apple is mulling to replace Qualcomm modems in the long run, likely eliminating third-party dependency with in-house products.
Overall Expectations
The Zacks Consensus Estimate for revenues from QCT segment is pegged at $6,540 million, indicating a significant improvement from $3,618 million reported in the year-ago quarter. Segment income before taxes is pegged at $1,749 million, implying a stellar rise from $479 million reported in the prior-year quarter. MSM shipments in the quarter are likely to be 218 million, up from 155 million with a strong rebound in emerging markets.
For the first quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.8-$8.6 billion. The Zacks Consensus Estimate for the same is pegged at $8,299 million, indicating a 63.5% increase from $5,077 million reported in the year-earlier quarter. Management anticipates non-GAAP earnings of $1.95-$2.15 per share. The consensus mark for earnings is currently pegged at $2.10 per share. Qualcomm recorded non-GAAP earnings of 99 cents per share in the prior-year quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for Qualcomm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Qualcomm currently has a Zacks Rank #2.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
The Earnings ESP for Cambium Networks Corporation (CMBM - Free Report) is +6.75% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Feb 18.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +0.76% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb 18.
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Will Higher Chip Revenues Aid Qualcomm (QCOM) Q1 Earnings?
Qualcomm Incorporated (QCOM - Free Report) is scheduled to report first-quarter fiscal 2021 results on Feb 3, after the closing bell. In the fiscal first quarter, it is likely to have recorded a stellar growth in revenues from the Qualcomm CDMA Technologies (“QCT”) segment owing to resumption of chip supply to China-based firms and wide proliferation of 5G-enabled devices.
Factors at Play
The QCT segment includes CDMA-based integrated circuit devices (chips) that are used mainly in smartphones, wireless data access cards and infrastructure equipment, and system software for wireless voice and data communications and GPS products.
During the fiscal first quarter, Qualcomm secured green signal from the Trump administration to restore supply of 4G chips to China-based Huawei Technologies, paving its way to provide some key raw materials for 4G mobile devices despite stringent U.S. trade restrictions. Notably, the company primarily used to supply chips for Huawei’s low-priced models as the China-based firm utilized indigenously developed chips for its flagship models. The resumption of chip supply is likely to have translated into incremental revenues for the company in the quarter under review.
In the fiscal first quarter, Qualcomm collaborated with Great Wall Motor Company Limited to provide the China-based automobile manufacturer with its much-acclaimed Snapdragon Ride Platform. The Snapdragon Ride Platform is equipped with high-end computer vision engines and Graphics Processing Unit that support multiple segments of autonomous driving. The company joined forces with DISH Network to assist it with the deployment of 5G network on the back of open and cloud-based solutions. It is likely to fast-track the commercialization of Virtualized RAN with the deployment of scalable 5G networks in the competitive North American market. Qualcomm also facilitated the deployment of 5G millimeter Wave network at South Korea’s Kumoh National Institute of Technology in collaboration with LG Uplus and LG Electronics. These initiatives, directed at bolstering the commercialization of 5G mmWave globally, are likely to have contributed to higher segment revenues in the to-be-reported quarter.
Moreover, Qualcomm partnered with Ericsson, Swisscom and handset maker — Oppo — to execute live 5G Voice over New Radio and data calls over a commercial 5G Standalone network. The groundbreaking test leveraged Qualcomm’s Snapdragon X60 5G Modem-RF System and was primarily focused on providing a streamlined 5G network while creating lucrative opportunities for operators with an enhanced customer experience. Meanwhile, the 5G carrier aggregation milestone was made possible with Snapdragon 888 5G Mobile Platform. Such technology collaborations are likely to have boosted the top-line growth of the segment.
However, the company expects an impact on device shipment due to the lengthening of handset replacement rates stemming from the adverse economic impact of the coronavirus pandemic. This, in turn, is likely to have affected unit volumes to some extent.
Q1 Developments
During the quarter, Qualcomm suffered a setback when certain media reports revealed that Apple is developing its own modem for its future devices. Qualcomm modems have been a key feature in the latest iPhone models, connecting the device to cellular networks for fast web browsing and instant app access. Built on indigenous technology that requires specialized engineering expertise and broad industry know-how, these modems have been the hallmark of impeccable performance standards. According to industry grapevines, Apple is mulling to replace Qualcomm modems in the long run, likely eliminating third-party dependency with in-house products.
Overall Expectations
The Zacks Consensus Estimate for revenues from QCT segment is pegged at $6,540 million, indicating a significant improvement from $3,618 million reported in the year-ago quarter. Segment income before taxes is pegged at $1,749 million, implying a stellar rise from $479 million reported in the prior-year quarter. MSM shipments in the quarter are likely to be 218 million, up from 155 million with a strong rebound in emerging markets.
For the first quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.8-$8.6 billion. The Zacks Consensus Estimate for the same is pegged at $8,299 million, indicating a 63.5% increase from $5,077 million reported in the year-earlier quarter. Management anticipates non-GAAP earnings of $1.95-$2.15 per share. The consensus mark for earnings is currently pegged at $2.10 per share. Qualcomm recorded non-GAAP earnings of 99 cents per share in the prior-year quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for Qualcomm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
QUALCOMM Incorporated Price and EPS Surprise
QUALCOMM Incorporated price-eps-surprise | QUALCOMM Incorporated Quote
Zacks Rank: Qualcomm currently has a Zacks Rank #2.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
T-Mobile US, Inc. (TMUS - Free Report) is set to release quarterly numbers on Feb 4. It has an Earnings ESP of +11.17% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Cambium Networks Corporation (CMBM - Free Report) is +6.75% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Feb 18.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +0.76% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb 18.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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