Qualcomm Inc (NASDAQ:QCOM) stock rose 2.01% (As on June 24, 11:12: AM UTC-4, Source: Google Finance) after the company is downgraded to Hold by JR Research. The analyst highlights QCOM’s significant underperformance versus peers and the S&P 500, raising concerns about whether the company’s diversification beyond smartphones remains viable. “Investors in QUALCOMM Incorporated are likely dumbfounded about just what could reignite the buying fervor that saw the stock scale to its June 2024 zenith… I think it’s fair for me to suggest that the market isn’t quite convinced that Qualcomm’s diversification from its handsets business to other new growth areas has validated a valuation upgrade.”
Further, the chipmaker’s soft current-quarter revenue outlook has outweighed better-than-expected fiscal second-quarter results. The company, which makes most of its revenue from selling chips for smartphones, including those made by Apple, said Q2 handset chip sales rose 12% year-over-year to $6.93 billion. The numbers resulted in net income of $2.81 billion overall, down slightly from the $2.33 billion profit it posted in the year-ago period. the company appears to be facing other pressures, even if it’s not overly concerned about the tariffs. In its third-quarter guidance, Qualcomm said it’s looking for revenue of $10.3 billion at the midpoint, slightly lower than Wall Street’s forecast of $10.35 billion. On the other hand, its earnings forecast of $2.70 per share came in ahead of the analyst’s $2.67 per share estimate. The demand for new handsets is expected to stall in the coming year. Qualcomm said that it doesn’t currently expect any material impact from tariffs, and that it had not seen elevated buying of its products ahead of tariffs during the quarter.
Moreover, Qualcomm’s most important business is selling chips such as modems and processors for smartphones, including high-end devices made by Samsung and Apple. Its overall handset chip sales increased 12% on an annual basis to $6.93 billion. Qualcomm’s QCT chips business rose 18% on an annual basis to $9.47 billion in revenue during the quarter.
On the other hand, QCOM has reached a deal to acquire UK-listed semiconductor firm Alphawave IP Group Plc for approximately $2.4 billion in cash, aiming to strengthen its artificial intelligence technology capabilities. According to Qualcomm’s statement, the offer values Alphawave at around 183 pence per share. As an alternative, Alphawave shareholders can choose to receive 0.01662 Qualcomm shares for each Alphawave share they hold. The board of Alphawave has unanimously endorsed the acquisition.