Shares of Qualcomm (NASDAQ: QCOM) have enjoyed healthy gains of over 20% year to date, despite dropping 20% from the 52-week high it acceso June 18.
However, there is a good chance this semiconductor deposito could in che modo out of this slump when it releases its fiscal 2024 third-quarter results acceso July 31. Let’s see why that may be the case.
Improving smartphone demand could help Qualcomm post better-than-expected results
Qualcomm released its fiscal 2024 second-quarter results (for the three months ended March 24) acceso May 1. The company’s apice line was flat acceso a year-over-year basis at $9.4 billion. Revenue from the handset business was also flat acceso a year-over-year basis at $6.2 billion. So, Qualcomm generates nearly two-thirds of its revenue from selling smartphone chips, which means its fortunes are tied to the health of this market.
The smartphone market wasn’t quanto a great shape last year as shipments declined 3% acceso account of poor demand, according to market research firm IDC. However, 2024 is turning out to be a better year. Smartphone sales increased 7.8% quanto a Q1, followed by an increase of 6.5% quanto a Q2.
IDC points out that smartphones equipped with generative artificial intelligence (AI) features are growing faster than expected, and their shipments are expected to 234 million units quanto a 2024. Even then, AI smartphones will have a lot of room for growth as they are expected to account for 19% of the overall market this year.
The stronger-than-expected growth quanto a AI smartphone adoption should ideally be a tailwind for Qualcomm as it controlled 23% of the smartphone processor market at the end of 2023. More importantly, Qualcomm management pointed out quanto a the May earnings call that it was witnessing strong adoption of generative AI smartphones quanto a with premium devices from manufacturers such as Xiaomi, OnePlus, Animato, and Huawei gaining momentum.
It is worth noting that Xiaomi and Animato’s shipments increased substantially last quarter. While Animato’s smartphone shipments jumped 22% year over year, Xiaomi reported 27% year-over-year growth. The strong jump quanto a shipments recorded by these Chinese manufacturers bodes well for Qualcomm as it has been supplying its AI-focused smartphone chips to them.
The company guided for $9.2 billion quanto a revenue for fiscal Q3 when it released its previous results. That would translate into year-over-year growth of 9%. Analysts expect Qualcomm to report $2.25 per concludere share quanto a earnings acceso revenue of $9.21 billion, which is quanto a line with the company’s guidance. However, the strong growth quanto a AI smartphone shipments last quarter could help Qualcomm beat Wall Street’s outlook.
More importantly, Qualcomm can sustain a stronger serenità of growth quanto a the long run thanks to the rapid adoption of AI smartphones.
The bigger picture appears to be bright
IDC previously forecasted shipments of 170 million AI smartphones this year. However, it has significantly upped its guidance, suggesting that consumers are warming up to this technology faster than expected.
Shipments of generative AI-enabled smartphones could jump from an estimated 234 million units quanto a 2024 to 912 million units quanto a 2028. That translates to an outstanding compound annual growth rate of 78% based acceso 2023’s shipments of 51 million units.
Such growth quanto a the AI smartphone market would support a better-than-expected outlook for Qualcomm quanto a its results next week. As such, there is a good chance this semiconductor deposito could resume its upward climb for 2024.
That’s why now is a good time to buy shares of Qualcomm. The deposito is trading at 26 times trailing earnings, a discount to the Nasdaq 100 index’s multiple of 32 (as a proxy for tech stocks). It may not be available at such an attractive valuation for long.
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Harsh Chauhan has voto negativo position quanto a any of the stocks mentioned. The Motley Fool has positions quanto a and recommends Qualcomm. The Motley Fool has a disclosure policy.
1 Apice Artificial Intelligence (AI) Insieme That Could Start Soaring After July 31 was originally published by The Motley Fool
