Qualcomm (QCOM) Implied Move Suggest Slight Upside If Earnings Comments Positive

Market is expecting the revenues to be around $9.52 billion with earnings per share of $2.37 for the quarter. The results should be in-line or slightly above market estimates as Qualcomm would benefit from a recovery in the smartphone market and after it ramps up production of its latest Snapdragon 8 Gen 3 smartphone chip.

Investors will focus on indicators of demand from the smartphone industry and Qualcomm's commentary on AI. However, market sentiments are mixed on the company's guidance. This could be due to the headwinds from Samsung using its own chips for its new S24 line of phones outside the U.S. market.

Qualcomm also face challenges that include loss of market share to Huawei and Apple's (AAPL) seasonal decline. The company's IoT and automotive businesses to drive diversification would be something that investors would look out as well.

While the gap between supply and demand for smartphone would changed from shortage to around 5% in 2024, the smartphone chipset is set to be higher than smartphone, this might be good news for Qualcomm.

QCOM last reported earnings on November 01, 2023 after the market close (AMC). The company held a conference call for investors at 4:45 PM eastern on the same day. QCOM shares gained +5.8% the day following the earnings announcement to close at 116.56. Following its earnings release, 90 days ago, QCOM stock has drifted +25.2% higher. From the time it announced earnings, QCOM traded in a range between 116.62 and 157.98. The last price (145.98) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is at 6.1%. We might see a positive price effect based on the demand of the smartphone industry in 2024 and also Qualcomm plan on the AI in their earnings comment.

The options market overestimated QCOM stocks earnings move 50% of the time in the last 12 quarters. The predicted move after earnings announcement was ±6.3% on average vs an average of the actual earnings moves of 6.6% (in absolute terms).

This shows you that QCOM tended to be more volatile than the options market predicted for the earnings stock price reaction. Market could be pricing in small positive price effect after the earnings announcement.

QCOM's last earnings implied volatility (IV30) going into earnings was 37.4. The last time QCOM released earnings, the implied volatility dropped to 24.9, resulting in an implied vol crush of 34%. 5 days after earnings, the 30 day IV was 24.3.

Average Implied Volatility Crush For QCOM Earnings: 20%

Average 30 Day Implied Volatility 1 Day Before Earnings: 42.4

Average QCOM 30 Day IV for the Day of Earnings: 33.9

Average 30 Day Implied Volatility 5 Days After Earnings: 32.9

If we look at Samsung earnings report, they are also affected by the demand for smartphone chips and they are lagging behind its rival because they do not really have an AI enabled chips. Samsung have plans to build up their own HBM capacity.

What I would be looking forward to is Qualcomm plan on their next chip, as they are expected to be a leader at the Edge for AI, but not until 2025-2026. Qualcomm might need to speed up their AI strategy.

Appreciate if you could share your thoughts in the comment section whether you think Qualcomm would produce a slightly better-than-expected results to beat estimates. Would Qualcomm unveil the next AI plan for IoT and the smartphone?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.