Qualcomm Drop 5.2% Pre-Market As Chip Supply Constraints Affect Sales

Qualcomm Inc. fell 5.2% in Thursday’s pre-market trading after the chipmaker said on its 1Q FY21 earnings call that financial performance could have been stronger if it had not been “supply constrained.”

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Furthermore, Qualcomm executives told Reuters that chip supply constraints will remain tight through the first half of 2021 without detailing the supply issue. “If we could make more, we could sell it,” Qualcomm CEO Steve Mollenkopf told Reuters in an interview.

Meanwhile, Qualcomm (QCOM) reported fiscal 1Q diluted earnings per share of $2.17 that came in ahead of analysts’ estimates of $2.10. Revenues came in at $8.24 billion, up by 62% year-on-year and below consensus estimates of $8.27 billion.

Qualcomm’s Mollenkopf stated, “We delivered an exceptional quarter, more than doubling earnings year-over-year due to strong 5G demand in handsets and growth in our RF front-end, automotive and IoT adjacencies, which drove record earnings in our chip business. We remain well positioned as the 5G ramp continues and we extend our core technology roadmap to adjacent industries.”

In the fiscal second quarter of FY21, the company expects diluted EPS come in at range of between $1.17 to $1.37 while non-GAAP diluted EPS is forecasted at $1.55-$1.75. Revenues in 2Q are projected to generate between $7.2 billion to $8 billion. (See Qualcomm stock analysis on TipRanks )

Following the earnings results, Mizuho Securities analyst Vijay Rakesh raised the stock’s price target from $163 to $170 and reiterated a Buy rating.

Rakesh commented, “While QCOM is at a decade high, and near-term margin outlook is soft, we believe it dominates 5G handsets with Snapdragon leadership, RF [radio frequency], Automotive telematics and a QTL [Qualcomm technology licensing] licensing rebound, with all major global handset OEMs licensed.”

The rest of the Street is cautiously optimistic about QCOM with a Moderate Buy consensus rating. That’s based on 17 analysts recommending a Buy and 7 analysts suggesting a Hold. The average analyst price target of $172 implies approximately 6% upside potential to current levels.