Investors should move to the sidelines in Qualcomm Inc (QCOM) after the chipmaker reported disappointing revenue for its fiscal Q3, says a Deutsche Bank analyst.

Qualcomm stock lacks a meaningful upside

Qualcomm noted continued weakness in smartphone chips in its recently concluded quarter that pushed revenue down to $8.44 billion versus $8.50 billion expected.  

Its guidance for the current quarter also came in shy of Street estimates – reacting to which, Deutsche Bank analyst Ross Seymore told clients in a research note on Thursday:

 

The duration of headwinds QCOM continues to face in its handset segment is leading to rising structural rather than just cyclical questions.

He downgraded Qualcomm stock today to “hold” and trimmed his price objective to $120 that does not suggest a meaningful upside from here.

Qualcomm’s guidance for the fourth quarter

Qualcomm now forecasts its revenue to fall between $8.1 billion and $8.9 billion in the fourth quarter on $1.80 to $2.0 of per-share earnings, as per the press release.

In comparison, analysts were at $1.91 per share and $8.7 billion, respectively. According to Ross Seymore:

 

QCOM’s tech advantages should enable it to capitalise on trends such as Edge AI and automotive, [but] much of these secular growth opportunities are already reflected in our CY24/25 [estimates].

Note that the Nasdaq-listed firm relies heavily on android phone sales. In the third quarter, its handset chip sales went down 25% on a year-over-year basis to $5.26 billion. Qualcomm stock is still up 10% versus the start of 2023.

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