While the S&P 500 is trending up this afternoon, Qualcomm (QCOM) is experiencing a dip in trading. This is in contrast to the upward movement of Action Alerts PLUS holdings Applied Materials (AMAT), United Rentals (URI), and Universal Display (OLED). On the other hand, shares of Apple (AAPL) are also trading off, potentially due to the aftermath of last week’s June quarter earnings report.
The decline in Qualcomm’s stock can be attributed to comments made by Micron (MU) during the KeyBank Technology Leadership Conference. Micron stated that it continues to observe weakness in the smartphone market, with global smartphone volumes expected to decline mid-single digits this year. However, the company foresees excess inventories clearing by the end of the year or shortly thereafter.
Last week, both Qorvo (QRVO) and Qualcomm expressed expectations for lower Android smartphone volumes. Qorvo projected normalized volumes by the end of 2023, while Qualcomm forecasted a high-single-digit decline in volumes. Despite this, Qualcomm management confirmed its support for new iPhone models launching in the upcoming weeks, indicating a potential improvement in chip volumes for the current quarter, with further gains expected in the December quarter.
Data from OMDIA and CounterPoint Research revealed that smartphone shipments in the first half of 2023 totaled 535-546 million units. Based on the 1.2-1.22 billion smartphones shipped in 2022, Micron’s forecast suggests shipments between 600-629 million phones in the second half of 2023, representing a 10%-17% increase over the first half. If we take Qualcomm’s forecast into consideration, it indicates a 6%-12% rise in smartphone volumes in the second half of 2023 compared to the first half, in line with the seasonal pattern witnessed in previous years.
Looking ahead, Skyworks Solutions (SWKS) is set to report its June quarter results tonight, and its performance could impact QCOM shares. Additionally, Taiwan Semiconductor (TSM) is expected to release its monthly revenue report later this week, which will provide further insight into the seasonal smartphone ramp.
Wall Street’s price target on QOCM shares has risen to $140 from $135 in recent weeks. The current P/E ratio is approximately 13.9x-12.6x on consensus calendar expectations for 2023 and 2024.
Considering the potential impact of SWKS’s results, there may be an opportunity to initiate a small starter position in QCOM shares and build on it in the coming months if the supply chain confirms the anticipated seasonal play.
