Qualcomm stumbles even as analysts praise new automotive wins; chips continue to fall

Sep. 23, 2022 1:42 PM ETQUALCOMM Incorporated (QCOM), AMDINTC, TXN, NVDA, MCHP, ON, AVGO, NXPIBy: Chris Ciaccia, SA News Editor34 Comments

Qualcomm Office Building in San Diego, California

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Along with the vast majority of semiconductor stocks, Qualcomm (NASDAQ:QCOM) shares fell nearly 3% on Friday, even as analysts noted that the company's announcement of $30B in design wins for its automotive unit is seen as the company "shifting into top gear."

Deutsche Bank analyst Ross Seymore, who has a buy rating on Qualcomm's (QCOM), noted that the company's first-ever automotive investor day showed off the "breadth and flexibility of its differentiated technology portfolio" that has allowed it to gain significant market share.

Seymore said that from a strategic standpoint, Qualcoom (QCOM) believes its broad portfolio of industry leading technologies across connectivity, edge processing and software, combined with its hardware and other software architecture "is a key differentiation versus the competition."

Seymore added that Qualcomm (QCOM) is likely to keep benefiting as it further pushes into the automotive space, while the smartphone market continues to remain choppy.

"[W]e believe the long-term diversification benefits of [Qualcomm's] automotive segment are not only intact but accelerating both in terms of quantity and quality," Seymore wrote.

In addition to boosting its design-win pipeline, Qualcomm (QCOM) also said its 2026 automotive revenue target would increase by 14% and raised its revenue projections over the next four years to 90%, up from 70%, due to existing design wins.

KeyBanc Capital Markets analyst John Vinh, who has an overweight rating on Qualcomm (QCOM), noted that much of the design win boost looks to be from an "unannounced OEM win."

"We were most encouraged with the incremental design win traction that [Qualcomm] is getting with [autonomous driving]," Vinh said. "And [we] like the long-term strategic diversification away from handsets."

Among other chip companies, Advanced Micro Devices (NASDAQ:AMD) fell 3% in mid-day trading as Morgan Stanley lowered its 2022 and 2023 earnings estimates.

A team of analysts, led by Joseph Moore, said they now see AMD (AMD) earning $4.02 a share in 2022, down from $4.24 a share. In 2023, the company is expected to earn $4.40 a share, down from $4.72 a share.

"While there is some anxiety about these numbers needing to come down, we note that this is still higher than where our estimates started [2022]," wrote the Morgan Stanley analysts.

Intel (INTC) and Nvidia (NVDA), both of which compete with AMD, declined 2.5% and 1.5%, respectively.

Several other chip stocks also continued their declines on Friday, including near 2% drops for Texas Instruments (TXN), Broadcom (AVGO) and 3% declines for NXP Semiconductors (NXPI), Microchip Technology (MCHP) and ON Semiconductor (ON).

On Thursday, the Philadelphia Semiconductor Index, which tracks 30 semiconductor-related companies, reached levels not seen since November 2020.

Earlier this month, Meta Platforms and Qualcomm (QCOM) entered into a deal to develop custom virtual reality chips.

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