Looking forward to 2020, Qualcomm 5G Qualcomm gives a positive outlook in the quarterly report.
Editor’s note: This article is from Huasheng Securities, author Huasheng College Lin Hai.
Qualcomm released its fourth-quarter earnings for the 2019 fiscal year after the close of trading. The revenue and profit decline were better than analysts’ expectations, and the company’s performance guidance exceeded expectations. The management is full of confidence in the progress of 5G next year. The stock price rose more than 5% after the market and rose nearly 50% this year.
Source: Huasheng Securities
Performance Overview: Quarterly earnings decline is lower than expected
Q4 adjusted revenues were $4.8 billion, compared with $5.8 billion in the same period last year, down 17% year-on-year, but better than market expectations of $4.71 billion.
The net profit for the quarter was $500 million, and the net loss for the same period last year was $500 million. The adjusted net profit was $900 million, down 25% from the $1.3 billion in the same period last year and 4% from the $1 billion in Q3.
The operating profit margin for the quarter was 22.9%, which was higher than market expectations of 22.5%.
Adjusted earnings per share fell 12.5% year-on-year to $0.78, higher than market expectations of $0.71.
Share repurchase: Q4 announced a $30 billion share repurchase program, with a $7.1 billion authorized repurchase as of September 29, 2019. On October 15, a cash dividend of $0.62 per share will be announced and will be paid on December 19, 2019.
Source: Corporate earnings, Huasheng Securities
implies that Apple is handed over to unlock business potential
From the business level, the company has two major businesses, one is sellingThe QCT department of mobile phone baseband chips and other electronic device chips is the company’s main source of revenue, and the second is the patent grant (QTL) business, which contributes most of the profits;
Q4 CDMA Technology Group (mobile phone baseband chips and others) revenue of 3.61 billion US dollars, down 22% year-on-year, higher than market expectations of 3.57 billion US dollars, pre-tax profit of 499 million US dollars, down 37% year-on-year; 2019 fiscal revenue It was 14.639 billion US dollars, down 15% from the previous year; the growth of this segment was affected by the shipment changes of cooperative mobile phone manufacturers. The high-end models of Huawei, Apple and Samsung did not adopt Qualcomm chips in 2018-2019, and the main customers (Oppo) , vivo, millet) The market share in the mainland continues to decline. Apple iphone 11 uses Intel’s baseband chip, but it is expected that next year’s 5G new machine will re-use Qualcomm chips. The company’s CFO revealed that for its 5G chips, there will be two turning points in 2020. The first inflection point is the 5G mobile phone release window next spring, mainly driven by Samsung and many Chinese brand smartphone manufacturers. The second inflection point next fall, another batch of flagship equipment will be equipped with Qualcomm 5G chip, many analysts believe that in terms of volume, Qualcomm’s so-called autumn customers are hinting at Apple.
The patent licensing group’s quarterly revenue was $1.15 billion, up 4% year-on-year, also higher than market expectations of $1.1 billion, pre-tax profit of $792 million, up 11% year-on-year; revenue for the entire fiscal year was $4.591 billion. Compared with the previous year’s 5.04 billion US dollars, it fell 9%. Previously, Apple and Qualcomm’s patent dispute continued for many years. The revenue included in the quarter included Apple’s patent fees, and the future patent hidden dangers were eliminated. After all, this part of the business contributed most of the company. The profit, and the performance growth is stable. In addition, 100 million US dollars of revenue came from a temporary agreement with Huawei, and the management said that the final agreement has not been reached.
Betting 5G, positive outlook in 2020
2020 is the first year of 5G commercialization in the industry. Many manufacturers including Apple will open a full service of 5G mobile phones. The domestic mobile phone giant headed by Huawei and Samsung have released 5G new machines this year.
A very important year, Qualcomm CEO said that the company has successfully implemented strategic priorities throughout the fiscal year: helping to promote 5G global commercialization and completing a number of important patent use agreements. It is expected that the supply of Apple’s 5G new machine (iphone 12) will boost investor optimism next year. The company expects global 3G, 4G, and 5G equipment delivery to be approximately 17.5-18.5, including 1.75-2.25 in 2020. The delivery of 5G mobile phones is about 10% to 12%.
The outlook for the future is positive, and the company’s performance guidance exceeds expectations:
The next quarter’s revenue is expected to be 4.4 billion to 5.2 billion US dollars, down 9% year-on-year to 7%, with an average of 4.8 billion US dollars, exceeding market expectations of 4.78 billion US dollars.Yuan;
Adjusted EPS was $0.80 to $0.90, down 23% to 33% year-on-year, higher than market expectations of $0.77.
In the fourth quarter, MSM (processors with baseband chips) chips are expected to ship between 1.45 and 165 million, down 11% to 22% year-on-year; the median value of 155 million is higher than market expectations of 149.8 million.
Comparatively, the Technology Licensing Group expects revenue to be in the range of $1.3 billion to $1.5 billion, a year-on-year increase of 28% to 47%.
Source: Corporate earnings, Huasheng Securities
Conclusion
Although Q4 earnings fell year-on-year, the decline was lower than market expectations. Reconciliation with Apple, in the next year of rapid development of 5G, is expected to become Apple’s 5G new chip supplier to boost market sentiment, more positive performance prospects to boost the market situation, 5G services quickly cover, the company is expected to be in the new one Grasping growth opportunities in the wave of rotation.