Qualcomm shares declined 1.8% during Thursday's regular trading session, settling near $138.5, with minimal movement in after-hours activity. The downturn coincided with a broader market retreat, as the Nasdaq Composite shed approximately 2%.
Analyst Downgrade and Price Target
Daiwa Securities revised its investment rating on Qualcomm, moving the stock from outperform to neutral. The firm established a new price target of $140 per share. This adjustment follows a series of analyst rating changes for the semiconductor company since its last quarterly earnings report.
Smartphone Memory Constraints Take Center Stage
The primary driver behind the cautious analyst stance and recent stock performance is renewed focus on smartphone segment challenges. During Qualcomm's fiscal first-quarter earnings call last week, Chief Financial Officer Akash Palkhiwala highlighted significant near-term uncertainty. He noted that soaring demand for memory solutions in artificial intelligence data centers is creating supply and pricing pressures for memory allocated to handset original equipment manufacturers (OEMs).
Chief Executive Cristiano Amon explicitly attributed the company's guidance concerns to DRAM supply issues within smartphones, stating the challenge is "100% related to memory." For its fiscal second quarter, Qualcomm provided a revenue forecast ranging from $10.2 billion to $11 billion, with adjusted earnings per share projected between $2.45 and $2.65.
Industry analysts echo this concern. Following the earnings release, Amon told Reuters that the company's performance miss was directly linked to memory shortages impacting smartphone consumer demand. Bob O'Donnell, Chief Analyst at TECHnalysis Research, suggested the memory supply crunch could persist for "the next several quarters," identifying China as a particular pressure point.
Investor Focus Shifts to Diversification
Despite the headwinds in its core handset business, investors are increasingly scrutinizing Qualcomm's growth in non-smartphone markets. The company has made substantial investments in automotive technology, connected devices, and has garnered significant attention for its data center chip ambitions. However, the stock's price action continues to be heavily influenced by developments in the mobile phone supply chain.
Samsung's Upcoming Launch as a Near-Term Catalyst
A key immediate event for Qualcomm is Samsung Electronics' Galaxy Unpacked event, scheduled for February 25 in San Francisco. As a leading supplier of Snapdragon processors and modems for a wide array of premium Android devices, Qualcomm typically experiences shifts in order volume and product mix correlating with major new smartphone launch cycles. The market will closely watch for signals regarding production schedules and component sourcing from this event.
The memory supply issue poses a prolonged risk. If smartphone manufacturers continue to adjust their production plans to manage component shortages and cost inflation, Qualcomm's chip shipment volumes could face pressure, even if underlying end-consumer demand remains stable.
Competitive Landscape and Market Share Pressures
Beyond supply chains, Qualcomm faces intensifying competition. The company remains engaged in a fierce battle with MediaTek for dominance in the Android processor space. Furthermore, two of its largest potential customers, Apple and Samsung, are aggressively advancing their internally developed chip solutions, which could limit Qualcomm's share of the next generation of devices.
Market attention now turns to whether Daiwa's downgrade will precipitate further target reductions from other analysts. Additionally, observers are watching to see if semiconductor stocks can stage a recovery following the recent sector-wide sell-off. The company's next quarterly earnings report is slated for May 6.
