Semiconductor giant QUALCOMM Incorporated (QCOM) recently reported better-than-expected fiscal 2022 results. However, the company lowered its outlook for its fiscal first quarter of 2023.

The company said, “The rapid deterioration in demand and easing of supply constraints across the semiconductor industry have resulted in elevated channel inventory.” It added, “Due to these elevated levels, our largest customers are now drawing down on their inventory, negatively impacting the mid-point of our EPS guidance for the first quarter of fiscal 2023 by approximately $0.80.”

The company expects diluted earnings per share for the first quarter to come between $1.72 and $1.92 versus $2.98 in the same period a year ago. The company expects the semiconductor division to generate revenue of $7.7-$8.3 billion, down from $8.85 billion a year ago.

However, Cristiano Amon, QCOM’s President, and CEO, said, “While our financial outlook is being temporarily impacted by elevated channel inventory, our diversification strategy and long-term opportunities remain unchanged.”

QCOM has lost 9% over the past month and 39.8% year-to-date to close the last trading session at $112.15.

Here is what could shape QCOM’s performance in the near term:

Improved Financials

QCOM’s total revenues came in at $44.20 billion for the year ended September 2022, up 31.7% year-over-year. Its non-GAAP net income came in at $14.25 billion, up 45.3% year-over-year, while its non-GAAP EPS came in at $12.53, up 46.7% year-over-year. Moreover, its income from continuing operations came in at $12.99 billion, up 43.6% year-over-year.

Mixed Valuation

QCOM’s forward EV/Sales of 3.22x is 28.7% higher than the industry average of 2.51x. Its forward Price/Sales of 3.08x is 28.6% higher than the industry average of 2.39x.

However, its forward EV/EBITDA of 8.14x is 31.9% lower than the industry average of 11.95x. Its forward Price/Cash Flow of 8.59x is 47.9% lower than the industry average of 16.48x. Also, its forward P/E of 12.85x is 42% lower than the industry average of 22.17x.

Robust Profitability

QCOM’s trailing-12-month gross profit margin of 57.84% is 15.2% higher than the industry average of 50.22%. Its trailing-12-month EBITDA and net income margins of 39.87% and 29.27% are 12.1% and 3.9% higher than the industry averages of 12.12% and 3.87%, respectively.

Moreover, QCOM’s trailing-12-month ROCE, ROTC, and ROTA of 92.88%, 32.81%, and 26.39%, compared with the industry averages of 6.51%, 3.72%, and 2.16%, respectively.

POWR Ratings Reflect Uncertain Prospects

QCOM has an overall rating of C, which equates to a Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

QCOM has a B grade for Quality, in sync with its higher-than-industry profitability ratios.

The stock has a C grade for Stability, in sync with its beta of 1.25.

In the 91-stock Semiconductor & Wireless Chip industry, QCOM is ranked #35.

Click here for the additional POWR Ratings for QCOM (Growth, Value, Momentum, Sentiment).

View all the top stocks in the Semiconductor & Wireless Chip industry here.

Bottom Line

QCOM reported solid financials for fiscal 2022 but cut its guidance for the ongoing quarter. Analysts expect its EPS to decline 7.5% per annum for the next five years. While the stock is currently trading at an attractive price level, given its mixed valuation and the company’s gloomy outlook, it could be wise to wait for a better entry point.

How Does QUALCOMM Incorporated (QCOM) Stack Up Against its Peers?

While QCOM has an overall POWR Rating of C, one might consider looking at its industry peers, Renesas Electronics Corporation (RNECF), United Microelectronics Corporation (UMC), and STMicroelectronics N.V. (STM), which have an overall A (Strong Buy) rating.

QCOM shares were trading at $112.79 per share on Tuesday afternoon, up $2.70 (+2.45%). Year-to-date, QCOM has declined -37.39%, versus a -18.29% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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