Convequity MSU: Qualcomm - Jan 2023

Summary

• Market (M), Street (S), and Us (U) perspectives differ on various sectors that Qualcomm operates in, such as Android handsets, auto, PC, server, and XR/VR.
• The "Us" viewpoint tends to be more bullish and forward-looking, particularly in areas like smartphone GenAI, auto, and XR/VR.
• There is optimism about Qualcomm's future in smartphone GenAI, auto, and XR/VR, while the Market and Street perspectives are more conservative and short-term focused.

Following on from our introductory report to the MSU framework, we have amended the scoring system. M, S, and U will be given one of the following scores:+++, ++, +, /, -, --, ---

The forward slash is a neutral view on the stock. +++ is the most bullish and --- is the most bearish.

For the Qualcomm (QCOM) MSU, we make the following scores to compare and distinguish the three types of views:

M+, S+, U++

MSU Key Takeaways

Here's a summary of how Market (M), Street (S), and Us (U) perspectives differ across various sectors that QCOM operates in:

• Android Handsets:
  • Market (M): Foresees stabilization in handset shipments, but wary of QCOM's future due to potential threats from AAPL's custom modems in the 6G era and Huawei's decision to use its in-house SoC.
  • Street (S): Focuses on short-term gains like handset demand stabilization and IoT inventory normalization, but less concerned about long-term threats from Apple and Huawei.
  • Us (U): Envisions significant innovation in smartphone GenAI, potentially overcoming current memory limitations and leading to advanced AI capabilities in smartphones. More optimistic about QCOM's future in this sector compared to M and S.
• Auto:
  • M: Moderately bullish, but underestimates QCOM’s potential as a major player in the digital auto value chain.
  • S: Acknowledges QCOM's growing presence but favors companies with a higher revenue share in auto.
  • U: Foresees QCOM dominating due to superior connectivity, which is essential for ADAS and FSD, as well as digital cockpits.
• IoT:
  • M & S: Not much to talk about and rightly so, IoT in the industrial sectors has taken a pause due to budget tightening.
  • U: Double-digit IoT growth will return for QCOM once the macro picture brightens up and Industry 4.0 revives once again.
• PC:
  • M: No analysis forecasting QCOM’s future business from its Snapdragon X Elite platform partnership with Microsoft.
  • S: Limited discussion, mainly focused on short-term prospects.
  • U: Sees a significant opportunity for QCOM in PCs through its AI-powered SoC and partnership with Microsoft, expecting rapid market share growth.
• Server:
  • M: Not pricing in QCOM’s prospects in the server CPU market.
  • S: Lacks discussion about QCOM’s server CPU opportunity.
  • U: Foresees a substantial opportunity for QCOM in the server CPU market, leveraging Nuvia’s expertise for ARM-based CPUs.

1. XR/VR:
   1. M: Underestimates QCOM’s potential in XR/VR headsets, despite its strong market share.
   2. S: Very limited discussion on QCOM’s prospects in this field.
   3. U: Extremely bullish, especially with the resurgence of the metaverse and QCOM’s significant market share in XR/VR SoCs.

Overall, the "Us" viewpoint tends to be more bullish and forward-looking, particularly in areas like smartphone GenAI, auto, and XR/VR, compared to the more conservative and short-term focused perspectives of the Market and Street. The table below shows the consensus revenue forecasts for the next two years at the top and our analysis below that breaks down QCOM's revenue into existing and emerging lines of business. Our revenue forecasts are viewable on the bottom row.