Apple Inc. (NASDAQ:AAPL)’s third quarter earnings report card and guidance for the current quarter, provides a “significant lead” for Qualcomm, Inc. (NASDAQ:QCOM)’s near-term outlook, says a report from Stifel by analysts Sanjiv R. Wadhwani and William C. Peterson. The analysts believe that Apple’s results and the outlook are “generally” positive for Qualcomm, which can provide an upside to the second half QCT MSM shipments and December quarter licensing revenue. Apple is currently Qualcomm’s biggest customer.
Qualcomm’s QTL business to grow, fuelled by Apple iPhone sales
Apple Inc. (NASDAQ:AAPL) posted higher than expected iPhone sales, which were offset by lower than expected ASPs (average selling price), signaling more than expected sales for iPhone 4 and 4S. Overall, iPhone sales improved 7.6% sequentially, which will benefit Qualcomm’s licensing division (QTL), believe analysts. The numbers will be reflected in Qualcomm’s QTL division in the December quarter. For the December quarter, analysts are expecting 7% growth for Qualcomm, Inc. (NASDAQ:QCOM)’s QTL business.
QCT business to see more sales of 3G modems
For Qualcomm’s QCT business, iPhone third quarter sales signal a mixed bag for Qualcomm, according to analysts. Qualcomm provides Gobi standalone baseband modems; the iPhone 4 & 4S use a 3G version and the iPhone 5, 5S and 5C use multimode 4G LTE versions. Apple’s third quarter report card reflects impressive sales for iPhone 4 and 4S, and going forward the sale of discounted iPhone 4S will make a “meaningful contribution.” Based on this, analysts believe that Qualcomm will register more sales of lower priced 3G modems. Also, analysts believe that moving forward, the mix may move from 3G to 4G modems.
Based on higher than expected sales for both September and December quarters, analysts expect Qualcomm to report an upside in MSM shipments for C3Q13 and C4Q13. Also, Qualcomm, Inc. (NASDAQ:QCOM) may witness a lower ASP in the second half of 2103 as Gobi chips command a lower ASP than integrated Snapdragon processors.
For the September quarter, analysts are expecting Qualcomm’s QCT business to report flat numbers, and a 2% sequential increase in MSM shipments. For the December quarter, QCT business is expected to register 12% sequential growth while MSM shipments may grow by 15%. Apart from this, analysts expect flat MSM ASPs for the September quarter, and a 2% fall in the December quarter “that was predicated on increase Apple share,” says the Stifel report.
Overall, analysts believe that if Apple Inc. (NASDAQ:AAPL) iPhone unit sales meet or beat expectations, then “Qualcomm’s MSM shipments could see upside offset by a larger than expected ASP decline.”
Analysts have assigned a Buy rating to Qualcomm, Inc. (NASDAQ:QCOM) with a price target of $80.