With Expectations Low For Q4, Will Qualcomm Spring A Surprise?

Mobile chipset major Qualcomm (NASDAQ: QCOM) is expected to publish its Q4 FY’23 results on November 1, reporting on a quarter that is likely to see the company’s revenue contract meaningfully year-over-year, on account of a slowdown in smartphone and tablet sales. We expect revenue for the quarter to come in at about $8.04 billion, marking a decline of about 29% versus last year, and roughly in line with the consensus estimates. We project that earnings will come in at about $1.81 per share, slightly ahead of consensus estimates. See our analysis of Qualcomm Earnings Preview for a closer look at what to expect when the company reports earnings.

Amid the current financial backdrop and a lackluster smartphone market, QCOM stock has faced a notable decline of 25% from levels of $150 in early January 2021 to around $110 now, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. Notably, QCOM stock has underperformed the broader market in each of the last three years. Returns for the stock were 20% in 2021, -40% in 2022, and -1% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 10% in 2023 – indicating that QCOM underperformed the S&P in 2021, 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Information Technology sector including AAPL, MSFT, and NVDA, and even for the megacap stars GOOG, TSLA, and AMZN. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could QCOM face a similar situation as it did in 2021, 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?