Qualcomm stock continued its strong downward trend this week as investors dumped companies in the semiconductor industry. It dropped to $162 on Monday, down by over 37% from the year-to-date high. The stock will be in the spotlight as it publishes its financial results on Wednesday.
Qualcomm to publish earnings as the memory shortage bites
QCOM stock has been in a strong sell-off in the past few months as its business has come under pressure amid the memory shortage. Most memory makers have shifted their priorities to the booming data center industry.
This trend has led to a DRAM shortage for smartphones, which has affected the industry, with its top clients experiencing a substantial slowdown. A report by IDC shows that only Apple and Samsung are selling more smartphones this year.
Xiaomi sold 31.2 million smartphones in the second quarter, down by 26% from a year earlier. OPPO, Vivo, and other brands saw their sales drop by 17%, 19.6%, and 13%, respectively. In the last earnings report, the CEO said:
“The entire industry continues to be impacted by unprecedented memory prices, higher manufacturing and input costs as well as supply chain shortages driven by overall data center demand.”
These trends have affected Qualcomm’s business, with its revenue and profitability growth slowing. Its last earnings report showed that revenues dropped by 4% in the third quarter to $9.9 billion, while its earnings before taxes fell by a whopping 24% to $2.96 billion.
Most of the weakness was because of its Qualcomm CDMA Technologies (QCT) division whose revenue fell by 5% to $8.5 billion. Handset revenue fell by 20% to $5.08 billion. This slowdown was offset by its automotive and IoT businesses, which grew by 61% and 9%, respectively.
The next important catalyst for Qualcomm’s stock will be its earnings, which will come out on Wednesday. Analysts expect the upcoming report to show that its revenue dropped by 9.9% in the fourth quarter to $10.15 billion, with its earnings per share falling from $3 to $2.16. These numbers will bring its annual revenue to $42.8 billion, down by 3 from the previous $44.14 billion.
The company will be quick to highlight its non-handset revenue, which it expects to get to $40 billion in 2029. This business includes its automotive, data center, and Internet of Things.
Qualcomm stock price technical analysis
The daily chart shows that the QCOM stock has plunged in the past few days. It dropped below the important support level of $169, its lowest level on October 15 this year.
The stock has already dropped below the 61.8% Fibonacci Retracement level. Also, QCOM has moved below the Strong, Pivot, Reverse level of the Murrey Math Lines tool. It has fallen below the 50-day moving average.
Therefore, the stock may continue falling, potentially to the Ultimate Support of the Murrey Math Lines tool at $150. On the flip side, a move above the key resistance level of $169 will invalidate the bearish outlook.