Qualcomm (QCOM) Q1 earnings preview: 5G shift likely to lessen weakness

Qualcomm Incorporated (NASDAQ: QCOM) is slated to report its first-quarter 2020 earnings results on Wednesday after the market closes. The results will be hurt by the extension of the waiting period by customers in the transition from 4G to 5G networks. The bottom line will continue to be hurt by costs and expenses while the top line will be benefited by the holiday season sales.

Meanwhile, the company’s shift in focus to the laptop segment from the smartphone is likely to drive growth in the near-term. Also, Apple (NASDAQ: AAPL) could turn towards Qualcomm for new innovation in the smartphone battle as the popularity is slowing fading. The company’s growth is still expected to be driven by 5G technology and autonomous vehicles but this is likely to yield the desired result in the long term.

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Qualcomm has been planning 5G chips for medium-priced smartphones for attracting the general public. Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD) continues to dominate as major rivals in the 5G chipsets. The company expects 5G to launch in all regions within the next two to three years.

Qualcomm continues to expect a positive inflection point as 5G ramps beginning in fiscal second-quarter. The company is expected to be beneficial by the decisions and investments made over the last several years, including 5G, the return of Apple licensing and product revenues, growth in RF front-end, and adjacent businesses.

Analysts expect the company’s earnings to drop by 29.20% to $0.85 per share and revenue will decline by 0.25% to $4.83 billion for the first quarter of fiscal 2020. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “hold” rating with an average price target of $99.56.

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For the fourth quarter, Qualcomm swung to a profit from a loss last year, driven by lower costs and expenses. Revenue fell by 17% as the demand for 4G remained dull due to the transition to the 5G networks. For the first quarter, the company expects revenue in the range of $4.4-5.2 billion and adjusted earnings in the range of $0.80-0.90.

The GAAP earnings are anticipated to decrease by 30-41% to the range of $0.51-0.61 per share for the first quarter. For the calendar 2020, Qualcomm expects 3G/4G/5G global device shipments in the range of 1.75-1.85 billion with 5G global handset shipments to be 175-225 million.

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