Qualcomm executives outlined plans to diversify the mobile chipmaker's business away from a dependence on Apple during the company's investor day on Tuesday. The investors liked what they saw.
The stock price of QCOM went up 7.9% to $181.81 on Tuesday. Shares have gone up 19% in 2021, up 19%.
While questions remain as to how quickly Apple AAPL will pivot from exclusively using Qualcomm's baseband chips, the chip maker is ahead of speculation with an outlook that assumes only a 20% share of iPhones in the 2023 launch. According to Piper Sandler analyst Harsh Kumar, that is a conservative assumption. He doesn't think Apple would make such a move overnight and previously expected Qualcomm to supply the chips for about half of the iPhones in the 2023 launch.
With the growth in Android, we feel that the 20% target is appropriate and conservative, and we expect the Apple impact to be a small speed bump rather than destroying the business model, Kumar wrote.
Qualcomm plans to complement stable growth in its mobile business with faster growth in areas like automotive and the internet of things. The latter refers to objects linked wirelessly through technology, like in a smart home. Kumar wrote in a note Tuesday that it highlighted its years of research and development in mobile phone chips as a jumping point to apply expertise in such areas, as well as tablets and personal computers.
Kumar wrote that it felt that the ability to leverage these technologies provides Qualcomm with an aunique cost position, as the incremental cost to enter these markets is minimal because it has already done the heavy lifting in mobile. In the future, Qualcomm will leverage its technology leadership in mobile to become the leader at the edge. The company expects to reach $3.5 billion in the next five years. After the investor day, Kumar raised his fiscal 2023 estimates. He forecast earnings per share of $11.96 on revenue of $44.5 billion, up from a previous $11.11 per share and $42.5 billion. He also raised his price target to $225 from $190, noting that the stock remains his firm's top large-cap stock pick.
He said that Qualcomm is on a multiyear growth path with almost all of its segments looking to drive healthy growth.