Shares Lower Ahead of US Open
Shares in US technology company Qualcomm are trading lower pre-market on Monday. The company’s stock price has seen a spate of selling over recent days. Price is under pressure following a softer than expected earnings release last week.
Qualcomm shares are now trading around 14% lower from the highs printed ahead of the release last week.
Earnings Beat, Revenues Miss
Qualcomm reported fourth-quarter earnings per share of $2.12, narrowly beating estimates for a $2.10 EPS. Revenues were slightly below estimates, however, at $8.23 billion versus the $8.27 billion Wall Street was looking for.
Much of the report was positive, though. Sales rose 63% year on year and earnings were up by 119%. The strong increase here was mainly linked to increased demand for its chips and intellectual property as a result of smartphones adopting the 5G network. The company also benefitted from the broader electronics boom born out of the pandemic.
In terms of guidance for the current quarter, Qualcomm is looking for between $7.2 billion and $8 billion in sales. This is above Wall Street’s own forecasts.
However, looking at the breakdown of the forecasts, the company is looking for sales of between $1.25 billion and $1.45 billion for its licensing division. This is slightly lower than the $1.43 billion Wall Street is looking for.
Big Boost To Chip Sales
Digging a little deeper into the earnings release, chip sales were the star of the show. Rising by 79% on the year, chips for handsets generated $4.22 billion in revenues over the final quarter of 2020. All in all, the company’s chip division saw an 81% jump in revenues, year on year.
Looking ahead, Qualcomm forecasts high single-digit growth for 2021 with between 450 – 550 million 5G devices set to be delivered, requiring 5G compatible chips. The firm’s RF front-end chips, which are mainly used for 5G devices, saw growth of over 150% year on year in the December quarter.
The company will now spend around $190 million on R&D and sales, as well as general and administrative expenses, of which $90 million is share-linked compensation.
Qualcomm Correcting Within Bullish Channel
Qualcomm shares are currently correcting lower within the bullish channel which has framed the move off the 2020 lows. Price has corrected from the recent all-time highs around 16787 and is now fast approaching the 141.75 level support, with the rising channel low coming in just below.
While still within the channel, the current move is viewed as corrective. Bias remains bullish in the near term. However, a break of the channel low and the 132.40 level could pave the way for a deeper reversal towards 124.17 first.