What to Expect From Qualcomm's Q4 Earnings
What to Expect From Qualcomm's Q4 Earnings
The company could lose billions because another firm canceled a chip design license
- Qualcomm is set to report earnings on Wednesday.
- Analysts expect the chipmaker to report earnings per share of $2.56 on $9.9 billion in revenue.
- QCOM is trading with relatively elevated implied volatility, holding an IVR of 91.2.
Qualcomm to report earnings Wednesday
Qualcomm (QCOM) is expected to report fiscal fourth quarter earnings on Wednesday, Nov. 6, after the closing bell. The reaction from traders should be telling, given that there are broader concerns about artificial intelligence investment in the market.
The chipmaker is one of the leaders in the fabless semiconductor segment and is focused on 5G mobile networking interfaces.
The stock fell in October after Arm Holdings (ARM) cancelled its chip design license amid a broader dispute between the two technology firms. The cancellation threatens billions of dollars of revenue for Qualcomm because it uses Arm’s architecture in many of its chips.
The dispute, which started in 2022, puts Qualcomm’s sophisticated licensing deals at risk. Arm sued Qualcomm after it acquired Nuvia, alleging the deal let Qualcomm use some of Arm’s proprietary technology and intellectual property. There is a period during which Qualcomm is allowed to respond, and this period runs into December. For now, the licensing deal remains under threat.
What do analysts expect?
Analysts expect Qualcomm to post earnings per share (EPS) of $2.56 on $9.9 billion in revenue. That would be up from Q4 ’23’s $2.20 per share on $8.66 billion in revenue.
Qualcomm has managed to beat EPS estimates in five of the last five quarters. The chipmaker missed revenue expectations once in the last five quarters. Analysts are mostly bullish on the stock, with 14 strong buy ratings, eight buys, 15 holds and one strong sell.
The average price target over the next twelve months is 209.76 per share, which would represent a 27% gain from this Monday’s stock price of 165.68 per share.
Trading QCOM earnings
Qualcomm, according to the options market, has an expected move of +/- 12.51 points, or 13.24% of the stock price. That is a bigger expected move relative to the average expected move for stocks in the S&P 500, which generally range from 5%-10% on earnings.
The elevated volatility is also reflected in the stock’s implied volatility rank (IVR) of 91.5, which means that volatility is highly elevated compared to the last 12 months of trading.
That said, premium in the option structure of QCOM offers traders plenty of juice to play with. That, along with its stock price, makes options selling strategies viable. For example, a trader with a neutral to bullish bias may want to sell a put spread to play an earnings move. For those expecting the move to stay within the expected move, an iron condor offers another potential way to take advantage of the elevated premium.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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