Qualcomm (ticker: QCOM) experienced a considerable surge in its shares on Thursday after beating earnings expectations. However, the chip maker’s association with Apple continues to cast doubt on the future performance of its stock.
Impressive Earnings Propel Qualcomm
In premarket trading, Qualcomm saw its shares rise by 5.6% to reach $117.10 following an outstanding earnings report and positive guidance. This could potentially mark a turning point for the company, as its stock has remained relatively stagnant this year due to declining smartphone sales, which have resulted in reduced demand for Qualcomm’s mobile processors and 5G wireless chipsets.
Qualcomm Expanding its Business Horizon
Qualcomm, a leading company in smartphone technology, is gearing up to diversify its business ventures beyond the smartphone industry. The company is now looking to make headway in the automotive chip sector. In their latest move, Qualcomm has introduced a processor specifically designed for personal computers. This advancement enables the execution of artificial intelligence applications, putting them in direct competition with industry giants Intel and Advanced Micro Devices.
Intel and AMD React to the Challenge
In response, Intel shares experienced a 0.3% increase during premarket trading on Thursday, while AMD saw a 0.6% rise. These positive movements reflect the recognition of the potential threat posed by Qualcomm’s new development.
A Bright Future Predicted for Qualcomm
Christopher Rolland, an analyst at Susquehanna Financial Group, anticipates a promising future for Qualcomm. He predicts that the company’s revenue will grow steadily in 2024 due to the introduction of average selling price increases from their cutting-edge AI capabilities. To support his optimistic outlook, Rolland has raised his target price for Qualcomm’s stock from $130 to $140 and maintains a Positive rating.
Tensions Between Qualcomm and Apple Linger
Despite these positive developments, Qualcomm’s turbulent relationship with Apple continues to be a subject of debate. While Qualcomm secured a contract to supply Apple with 5G chips for their iPhone launches over the next three years, it is widely expected that Apple will eventually transition to using their own in-house chips. This shift will likely result in Qualcomm losing a significant portion of their business with Apple.
Rick Schafer, an analyst at Oppenheimer, believes that Apple remains motivated to part ways with Qualcomm. In his research note, he highlights the persistent concern of a massive $10 billion financial burden that lingers as a result of this impending separation.
Overall, Qualcomm is making bold moves to expand its business horizons beyond smartphones. The company’s foray into the automotive chip sector and their commitment to innovation in AI technology signal an exciting future filled with growth and possibilities.
Qualcomm: A Perform Rating
Qualcomm stock has maintained a Perform rating, as stated by Schafer. While no target price was specified, this evaluation suggests a steady outlook for the company.
In Brief
- Rating: Perform
- Analyst: Schafer