Shares of Qualcomm (QCOM) are up $1.73, or almost 3%, at $61.27 after the company last night beat fiscal Q1 results and a offered a better-than-expected Q2 outlook on rising volume of phone chipset shipments.
The company increased its revenue and profit outlook for the fiscal year, citing higher average prices on mobile devices (which contribute to company royalties), and also raised its estimate for total chipset shipments for the calendar year, citing in particular growth in demand in emerging markets.
During the company’s conference call, CEO Paul Jacobs noted the company was seeing increased demand for smartphones at various prices across an expanding number of regions. He argued the company’s “QTL” licensing business is benefitting from the “global migration from 2G to 3G” handsets. And Jacobs made a point of focusing on growth in China, the number two region for smartphone sales. China will “surpass 1 billion mobile connections” in the March quarter, he said, with 3G cellular connections soon making up a quarter of those connections. He also spoke of the opportunity in non-phone devices such as tablet computers.
Price targets are going up modestly this morning, and estimates are rising, as the Street seems to see increased dominance in chipset sales and an ever-expanding market for smartphone devices.
Simona Jankowski, Goldman Sachs: Reiterates a Buy rating and raises her price target to $72 from $65, writing that the “confluence of strong handset demand and Qualcomm’s chipset share gains” will “continue to drive upside to EPS and multiple expansion” for the stock. “Importantly, the stronger than expected demand in emerging markets is coming at higher than expected ASPs, contrary to market concerns that ASPs might decline due to an unfavorable mix shift. Thus, Qualcomm also raised its FY12 handset ASP forecast midpoint to $210 from $203 despite the mix shift to emerging markets.” Jankowski raised her 2012 forecast to $19.7 billion in revenue and $3.45 per share from a prior $19 billion and $3.21.
Mike Walkley, Canaccord Genuity: Reiterates a Buy rating and raises his price target a dollar to $75. The company’s outlook for 146 million to 154 million “MSM” chipsets shipped this quarter is “much better than industry seasonality,” he concludes. “we believe Qualcomm is well positioned to post strong earnings growth during F2012 and F2013 due to stable royalty rates, strong connected tablet and smartphone sales, increasing market share for integrated chipsets.” Walkley raised his 2012 EPS view to $3.71 from $3.55.
Ian Ing, Lazard Capital Markets: Reiterates a Buy rating and raises his price target two dollars to $69. Sales of Qualcomm’s “8960” chipset should be helped in Q2 and onward by the release of phones from Nokia (NOK) with Microsoft’s (MSFT) software, and by “LTE”-based 4G phones, he thinks. “March EPS de-levers slightly as QCT operating margin is guided to the low end of FY12 range due to re-pricing and R&D, while they likely priced aggressively to gain China share (we think China 3G basebands sell for $8-$10). That said, the full year 20%-22% range is reiterated, driven by a more balanced mix of growth and higher levels of integration (MSM8960).” Ing raised his 2012 outlook to $19.83 billion in revenue and $3.77 in EPS from a prior $18.6 billion and $3.65 per share.
James Faucette, Pacific Crest: Reiterates an Outperform rating and a $70 price target. The company’s results are being helped by better-than-expected demand from Apple (AAPL), he thinks, and also a better-than-expected mix of phones in coming quarters. “Given recent cash flows, we believe the company is in a position to potentially increase cash returns to investors either by an increased dividend or aggressive share buybacks.” Faucette raised his 2012 outlook to $19.5 billion in revenue and $3.74 per share in profit from a prior $18 billion and $3.60 per share.
Chris Caso, Susquehanna Financial Group: Reiterates a “Positive” rating and raises his price target $3 to $73. The story is all about China, he argues. “while some upside was expected after the AAPL report, we think the Street has tended to underestimate the growth that has been occurring in China. China growth is the reason QCOM cited for the increase in QTL guidance,” referring to the licensing part of Qualcomm’s business. Caso raised his outlook for this year to $20.2 billion in revenue and $3.93 per share from a prior $19.5 billion and $3.89.
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