Qualcomm Pops 13% As Strong Outlook Reflects 5G Demand

Qualcomm shares surged 12.9% in the extended trading session on Wednesday as the chipmaker exceeded analysts’ expectations for the fourth quarter of fiscal 2020 (ended Sept. 27) and issued a strong outlook for the first quarter of fiscal 2021.

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The company’s revenue for 4Q FY21 increased 73.4% Y/Y to $8.35 billion on a reported basis and 35% on an adjusted basis to $6.50 billion. Qualcomm (QCOM) exceeded analysts’ adjusted revenue forecast of $5.93 billion. Also, 4Q adjusted EPS surged 86% Y/Y to $1.45, surpassing analysts’ estimate of $1.17. The company’s earnings gained from strong sales and enhanced margins.

Commenting on the 4Q results, CEO Steve Mollenkopf stated “Our fiscal fourth quarter results demonstrate that our investments in 5G are coming to fruition and showing benefits in our licensing and product businesses.”

He added, “We concluded the year with exceptional fourth quarter results and are well positioned for growth in 2021 and beyond. As the pace of disruption in wireless technology accelerates, we will continue to drive growth and scale across our RF front-end, Automotive and IoT adjacencies.” (See QCOM stock analysis on TipRanks)

The company expects 1Q FY21 revenue between $7.8 billion and $8.6 billion and adjusted EPS between $1.95 and $2.15. Qualcomm’s guidance beat analysts’ prediction of revenue of $7.14 billion and EPS of $1.69.

On its 4Q conference call, the company said that 5G represents the single largest opportunity in its history. Qualcomm, which is a leading supplier of chips powering 5G devices, expects to benefit from the strong demand for 5G phones and predicts 450 million to 550 million 5G smartphone shipments in calendar-year 2021.

Following the print, Mizuho Securities analyst Vijay Rakesh reiterated a Buy rating for Qualcomm and increased his price target to $154 from $145 as he believes that “QCOM drives a global multi-year 5G transition ahead with Snapdragon leadership, RF, Automotive telematics and a QTL [Qualcomm Technology Licensing] licensing rebound, with all major handset OEMs [Original Equipment Manufacturer] licensed.”

The Street also has a bullish outlook on Qualcomm. Its Strong Buy consensus is based on 15 Buys versus 4 Holds. Shares have risen 46.1% year-to-date. As a result, the average analyst price target of $140.81 indicates an upside potential of 9.2% in the months ahead.