Smartphone Weakness Finally Catches Up to Qualcomm As Inventories Build, Lowering FVE to $140

Qualcomm's fiscal fourth-quarter revenue was consistent with our expectations, the firm benefiting from the ongoing ramp of 5G smartphones and broad-based chip demand. Guidance was lower than our expectations though. This was due to weakness in Android smartphones and consumer Internet of Things, due to macroeconomic headwinds and China's COVID-19 lockdowns that resulted in elevated channel inventories. For calendar 2022, smartphone volumes are estimated to be down in the low double digits. We lower our fair value estimate to $140 per share from $163, as we expect fiscal 2023 to be a cyclical downturn for Qualcomm. Shares fell 8% during after-hours trading and are undervalued. Management estimates there is about 8-10 weeks of elevated inventory in the channel, which we think will take at least a few quarters to work through.