Qualcomm’s outlook suggests it’ll take a few more quarters to ‘hit a bottom’

Qualcomm Inc (NASDAQ: QCOM) is trading down in extended hours even though it reported better-than-expected revenue for its second financial quarter despite the slowdown in handset demand.

Why is Qualcomm stock down?

The semiconductor stock is under pressure because the management said inventory issues will remain for the next two quarter at least. To that end, Qualcomm forecasts $1.70 to $1.90 of per-share earnings in its current quarter on up to $8.9 billion in revenue.

In comparison, analysts were at $2.17 a share and $9.13 billion, respectively. Reacting to the earnings print, Susquehanna analyst Chris Rolland said:

On the handset side of things in China, it’s a bloodbath right now. You have demand way down from COVID levels. In addition, you have a massive overhang of handset inventory.

Qualcomm stock is now back to the price at which it started the year.

Notable figures in Qualcomm Q2 earnings report

Net income printed at $1.7 billion versus the year-ago $2.93 billion

Per-share earnings also declined significantly from $2.57 to $1.52

Adjusted EPS came in at $2.15 as per the earnings press release

Total revenue tanked 18% year-over-year to $9.28 billion

FactSet consensus was $2.15 a share on $9.09 billion in revenue

Should you buy Qualcomm shares?

Handset and IoT sales were down 17% and 24% respectively. Auto sales, however, increased 20% in the recently concluded quarter. On CNBC’s “Closing Bell: Overtime”, Rolland noted:

Apple is weak, android is also weak and doesn’t seem to be bouncing. There’s a ton of inventory in China. So, it’ll be a quarter or perhaps two before Qualcomm and everything handset related hits a bottom.

Still, the Susquehanna analyst likes Qualcomm stock as a long-term investment. His $135 price target suggests about a 30% upside from here.

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