QCOM : NASDAQ : US$71.12
Qualcomm manufactures chipsets, licenses technology,
and provides global wireless services. Qualcomm has a
strong wireless intellectual property position and is a
leading wireless chipset supplier.
All amounts in US$ unless otherwise noted.
Technology — Communications Technology — Semiconductors
SOLID RESULTS WITH BETTER THAN FEARED MARCH GUIDANCE; LONG-TERM DRIVERS INTACT
Investment recommendation: Qualcomm posted strong Q1/F2014 results
with pro forma EPS of $1.26 (including a net $0.04 gain from the Omnitracs
business divestment offset by other charges) above our $1.15 estimate.
Qualcomm issued Q2/F’14 guidance slightly below our estimates, but we
believe better than investor concerns post soft December quarter results from
Samsung and Apple. Qualcomm raised its full year F2014 pro forma EPS
guidance and maintained expectations for stronger 2H/F2014 results versus
1H/F2014 with improving QCT EBT margins in 2H/F2014. We believe
continued growth of smartphones, connected devices such as tablets, the
upgrade to new air interface technologies such as LTE, LTE Advanced, and
TDD-LTE, and market share gains for integrated Snapdragon solutions
should drive solid F2014 and F2015 sales and earnings growth. We reiterate
our BUY rating and raise our price target to $86.
Qualcomm reported Q1/F2014 results above our and consensus
estimates driven by stronger QCT sales of $4.6B and EBT margins of
19.6% versus our $4.5B/17% estimates. Qualcomm issued Q2/F2014
guidance slightly below our estimates due to slightly weaker QCT chipset
sales expectations during the seasonally soft March quarter.
Management raised its F2014 full year guidance to $26.8B and $5.10 at
the range midpoints and maintained its expectations for stronger
2H/F’14 results versus 1H/F’14 driven by an improving chipset mix in
all tiers, growing sales into China’s LTE customer base, and lower
operating expense levels. We remain impressed with Qualcomm’s 14.5%
device (QTL) unit growth estimate for C2014 with only modest ASP
declines anticipated, and we are encouraged by management’s
comments that TD-LTE units in China could drive unit growth upside.
With Q1/F2014 results above our estimates, combined with Qualcomm’s
raised F2014 pro forma EPS outlook, we raise our F2014 pro forma EPS
estimate from $5.04 to $5.12 and our F2015 estimate from $5.66 to $5.76.
Valuation: Our $86 price target is base