We See Qualcomm’s Smartphone Woes Persisting for Most of 2023; No Change to $140 FVE

Qualcomm reported fiscal first-quarter results slightly below our expectations, as macroeconomic weakness negatively impacted its smartphone-centric sales. The firm’s Android smartphone customers are still plagued by elevated channel inventories and tepid demand, especially in China. Management expects industrywide inventory levels to normalize by the second half of calendar 2023, but we are less optimistic about a quick turnaround and believe smartphone demand may not recover until 2024. We are maintaining our $140 fair value estimate as our outlook on a slower recovery is already incorporated in our model for narrow-moat Qualcomm. Shares look fairly valued at current levels.