We Expect Another Record Year for Qualcomm in 2022 Led by Chip Business; Raising FVE to $144

Qualcomm reported fiscal fourth-quarter results above the high end of management’s guidance, with the firm benefitting from the ongoing ramp of 5G smartphones and broad-based chip demand. Chipset, or QCT, sales were boosted by continued 5G adoption including Apple’s latest iPhones that feature Qualcomm’s modem and other content such as a transceiver and subsystem for the sub-6 GHz portion of the overall 5G module. For calendar 2021, management expects mid- to high-single-digit unit growth for smartphones, with 500 million to 550 million 5G handset shipments. We’re very impressed with Qualcomm’s non-handset growth, with aggregate RF front-end, auto, and Internet of Things sales surpassing $10 billion in fiscal 2021 (up 69% year over year). Based on management’s expectation of fiscal 2022 non-GAAP EPS growth to exceed 20%, we raise our fair value for narrow-moat Qualcomm to $144 per share from $136. We recommend prospective investors seek a wider margin of safety.