Market Snapshot
briefing.com
| Dow | 32165.41 | +15.62 | (0.05%) | | Nasdaq | 10350.34 | -114.31 | (-1.09%) | | SP 500 | 3742.34 | -17.42 | (-0.46%) | | 10-yr Note | -24/32 | 4.12 |
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| | NYSE | Adv 1222 | Dec 1844 | Vol 954 mln | | Nasdaq | Adv 1889 | Dec 2698 | Vol 5.0 bln |
Industry Watch
| Strong: Energy, Industrials, Materials, Utilities, Real Estate |
| | Weak: Information Technology, Communication Services, Financials, Health Care |
Moving the Market
-- Rising Treasury yields, but pulling back from overnight highs
-- S&P 500 finding support at 3,700 level
-- Digesting Fed Chair Powell's comments yesterday indicating that the Fed is apt to raise rates higher than expected for longer than expected
-- Qualcomm (QCOM) disappointing guidance weighing on growth stocks
-- Weak mega cap stocks
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Closing Summary
03-Nov-22 16:30 ET
Dow -145.51 at 32004.28, Nasdaq -181.86 at 10282.79, S&P -39.80 at 3719.96
[BRIEFING.COM] The stock market had a negative disposition today. Shortly after the open, the Dow, Nasdaq, and S&P 500 were down 1.2%, 1.9%, and 1.6%, respectively. The major averages recovered from those levels as Treasury yields pulled back from overnight highs and the S&P 500 found support at the 3,700 level. The market took another leg lower ahead of the close, weighed down by lagging mega cap stocks.
Weakness today was due to some carryover momentum from yesterday's post-FOMC retreat, an overnight spike in Treasury yields, and reports that health authorities in China were shooting down the social media speculation that China might soon shift away from its zero-COVID policy. Some disappointing guidance from the likes of Qualcomm (QCOM 103.88, -8.62, -7.7%), Roku (ROKU 51.84, -2.48, -4.6%), and Fortinet (FTNT 45.93, -7.30, -13.7%) also weighed on investor sentiment.
The 2-yr note yield and the 10-yr note yield hit 4.75% and 4.24%, respectively, overnight as market participants adjusted to Fed Chair Powell's signaling that the Fed's terminal rate is apt to be higher than previously expected. The 2-yr note yield settled the session at 4.72% and the 10-yr note yield settled at 4.12%.
Mega cap stocks were a drag on the market today. The Vanguard Mega Cap Growth ETF (MGK) closed down 2.2% versus a 0.5% loss in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.1% loss in the S&P 500.
Roughly half of the 11 S&P 500 sectors closed in the red. Information technology (-3.0%) was buried in last place while energy (+2.0%) sat atop the leaderboard.
The information technology sector was weighed down by earnings-driven losses in Fidelity Nat'l Info (FIS 57.18, -22.29, -28.1%) and Fortinet (FTNT 45.93, -7.30, -13.7%). Meanwhile, positive earnings news from ConocoPhillips (COP 133.82, +7.31, +5.8%), Marathon Oil (MRO 31.42, +1.66, +5.6%), and Apa Corp (APA 47.29, +3.05, +6.9%) boosted the energy sector.
On a related note, energy complex futures settled the session lower. WTI crude oil futures fell 2.0% to $88.07/bbl and natural gas futures fell 3.7% to $6.31/mmbtu.
Ahead of Friday's open, Cardinal Health (CAH), Duke Energy (DUK), Telus (TU), Dominion Energy (D), Magna (MGA), Enbridge (ENB), Fluor (FLR), Hershey Foods (HSY), and Huntsman (HUN) are set to report earnings.
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 ET: October Nonfarm Payrolls (Briefing.com consensus 220,000; prior 263,000), Nonfarm Private Payrolls (Briefing.com consensus 225,000; prior 288,000), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.3%), Unemployment Rate (Briefing.com consensus 3.6%; prior 3.5%), and Average Workweek (Briefing.com consensus 34.5; prior 34.5)
Reviewing today's economic data:
- Weekly Initial Claims 217K (Briefing.com consensus 222K); Prior was revised to 218K from 217K; Weekly Continuing Claims 1.485 mln; Prior 1.438 mln
- The key takeaway from the report is that the low level of initial claims remains indicative of a tight labor market and a data point for the Fed that will keep it on a tightening path.
- September Trade Balance -$73.3 bln (Briefing.com consensus -$71.0 bln); Prior was revised to -$65.7 bkn from -$67.4 bln
- The key takeaway from the report is that exports were $2.8 billion less than August exports while imports were $4.8 billion more than August imports, reflecting in part the comparatively weaker activity abroad versus the activity in the U.S.
- Q3 Productivity-Prel 0.3% (Briefing.com consensus 0.5%); Prior -4.1%; Q3 Unit Labor Costs-Prel 3.5% (Briefing.com consensus 4.2%); Prior was revised to 8.9% from 10.2%
- The key takeaway from the report is that nonfarm business sector labor productivity decreased 1.4% from the same quarter a year ago, and the 1.4% decline marked the first time since 1982 that there have been three consecutive declines in this measure.
- October IHS Markit Services PMI - Final 47.8; Prior 46.6
- September Factory Orders 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.2% from 0.0%
- The key takeaway from the report is that it conveyed some softness in business spending, evidenced by the 0.4% decline in nondefense capital goods orders excluding aircraft.
October ISM Non-Manufacturing Index 54.4% (Briefing.com consensus 55.2%); Prior 56.7%
Dow Jones Industrial Average: -11.9% YTD
S&P Midcap 400: -16.7% YTD
S&P 500: -22.0% YTD
Russell 2000: -20.7% YTD
Nasdaq Composite: -33.9% YTD
Market little changed into the close
03-Nov-22 15:30 ET
Dow +14.56 at 32164.35, Nasdaq -119.55 at 10345.10, S&P -19.19 at 3740.57
[BRIEFING.COM] The major averages are little changed in the last half hour.
Warner Bros. Discovery (WBD), Starbucks (SBUX), EOG Resources (EOG), PayPal (PYPL), Amgen (AMGN), Live Nation (LYV), Block (SQ), Carvana (CVNA), Expedia Group (EXPE), DXC Technology (DXC), Motorola Solutions (MSI), Monster Beverage (MNST), DoorDash (DASH), Illumina (ILMN), Floor & Decor (FND), Coinbase Global (COIN), and Twilio (TWLO) headline the earnings reports after today's close.
Ahead of Friday's open, Cardinal Health (CAH), Duke Energy (DUK), Telus (TU), Dominion Energy (D), Magna (MGA), Enbridge (ENB), Fluor (FLR), Hershey Foods (HSY), and Huntsman (HUN) are set to report earnings.
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 ET: October Nonfarm Payrolls (Briefing.com consensus 220,000; prior 263,000), Nonfarm Private Payrolls (Briefing.com consensus 225,000; prior 288,000), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.3%), Unemployment Rate (Briefing.com consensus 3.6%; prior 3.5%), and Average Workweek (Briefing.com consensus 34.5; prior 34.5)
Small and mid caps outperform
03-Nov-22 15:05 ET
Dow +15.62 at 32165.41, Nasdaq -114.31 at 10350.34, S&P -17.42 at 3742.34
[BRIEFING.COM] The major averages were confined to a narrow trading range in the last half hour. The Dow pushed into positive territory.
Energy complex futures settled the session lower. WTI crude oil futures fell 2.0% to $88.07/bbl and natural gas futures fell 3.7% to $6.31/mmbtu.
Small and mid cap stocks are holding up fairly well today. The Russell 2000 is down 0.1% while the S&P Mid Cap 400 is up 0.3%.
Earnings movers once again dot either side of S&P 500
03-Nov-22 14:25 ET
Dow -14.82 at 32134.97, Nasdaq -111.95 at 10352.70, S&P -19.88 at 3739.88
[BRIEFING.COM] The S&P 500 (-0.53%) is in second place to this point on Thursday, down just shy of 20 points.
S&P 500 constituents Lincoln National (LNC 35.21, -16.89, -32.42%) Global Payments (GPN 97.36, -10.22, -9.50%), and Kellogg (K 69.06, -6.76, -8.92%) pepper the bottom of today's standings. LNC and K slip following earnings, while GPN continues recent earnings-related weakness.
Meanwhile, Pennsylvania-based chemicals firm Air Products (APD 265.73, +20.56, +8.39%) is one of today's best performers following this morning's Q4 beat.
Gold slumps a day after Fed hikes rates
03-Nov-22 14:00 ET
Dow -87.14 at 32062.65, Nasdaq -122.69 at 10341.96, S&P -25.83 at 3733.93
[BRIEFING.COM] With about two hours to go on Thursday the tech-heavy Nasdaq Composite (-1.17%) is still today's worst-performing major average, having moved largely sideways over the last 30 minutes.
Gold futures settled $19.10 lower (-1.2%) to 1,630.90/oz, their lowest finish since April 2020, pressured in part by the Fed's 75 basis point rate hike yesterday afternoon, which today sends the dollar and yields to solid gains.
Meanwhile, the U.S. Dollar Index is up about +1.4% to $112.93.
Page One
Last Updated: 03-Nov-22 09:06 ET | Archive
Powell blows prevailing wind of disappointment
The message from Fed Chair Powell yesterday was a downer for the stock market, which traded down as that message was being heard. Mr. Powell said a lot, but the point that registered was his view that it is very premature to talk about pausing the rate hikes and that the Fed still has a ways to go to get the policy rate to a restrictive level that is sufficient for getting inflation back down to the 2.0% target.
The added connection for market participants is that the Fed's terminal rate is apt to be higher than previously expected and is likely to be held there longer than previously expected. Accordingly, the stock market's "pivot hopes" were effectively dampened by the individual doing the driving.
Between the post-directive high and post-press conference low on Wednesday, the S&P 500 dropped 136 points or 3.5%.
The selling pressure has persisted this morning, too, primarily because the selling pressure in the Treasury market has persisted, Qualcomm (QCOM) delivered some disappointing guidance that is weighing further on growth stocks and investor sentiment, and health authorities in China have reportedly shot down the social media speculation that China will soon be shifting away from its zero-COVID policy.
Currently, the 2-yr note yield is up 20 basis points to 4.75% and the 10-yr note yield is up 15 basis points to 4.21%.
The S&P 500 futures are down 40 points and are trading 1.1% below fair value, the Nasdaq 100 futures are down 135 points and are trading 1.2% below fair value, and the Dow Jones Industrial Average futures are down 254 points and are trading 0.8% below fair value.
There has been a ton of earnings news since yesterday's close. It hasn't been all bad; in fact, most of the reports have been better than expected per usual. The guidance, however, has been spotty, and stocks like Qualcomm (QCOM), Roku (ROKU), Fortinet (FTNT), Qorvo (QRVO), Moderna (MRNA), and Cognizant Technology (CTSH) are paying a price for it.
Their struggles are a headwind for the market, yet the prevailing wind is the disappointment that the Fed sounds like it is intent on plowing ahead with more rate hikes and that it doesn't know itself where the end point will be.
Granted future rate hikes might not be as aggressive as 75 basis points (like the last four hikes have been), yet the light of a pivot the market thought it saw at the end of the tunnel turned out to be a freight train yesterday.
On that note, a few other central banks chugged ahead with rate hikes of their own today. The Norges Bank raised its policy rate by 25 basis points to 2.50% and the Bank of England raised its policy rate by 75 basis points to 3.00%. Both moves were expected. Notably, there were two dissents at the BOE meeting that were rooted in a preference for a smaller increase of 50 basis points and 25 basis points, respectively.
The 10-yr UK gilt yield is up 17 basis points to 3.56% following along with other sovereign bond yields this morning.
In other developments, there was a batch of economic releases out of the U.S. at the bottom of the hour.
- Initial jobless claims for the week ending October 29 decreased by 1,000 to 217,000 (Briefing.com consensus 222,000) and continuing claims for the week ending October 22 increased by 47,000 to 1.485 million.
- The key takeaway from the report is that the low level of initial claims remains indicative of a tight labor market and a data point for the Fed that will keep it on a tightening path.
- Q3 Productivity increased 0.3% (Briefing.com consensus +0.5%) following an unrevised 4.1% decline in the second quarter. Unit labor costs jumped 3.5% (Briefing.com consensus +4.2%) following a downwardly revised 8.9% increase (from 10.2%) in the second quarter.
- The key takeaway from the report is that nonfarm business sector labor productivity decreased 1.4% from the same quarter a year ago, and the 1.4% decline marked the first time since 1982 that there have been three consecutive declines in this measure.
- The September trade deficit widened to $73.3 billion (Briefing.com consensus -$71.0 billion) from an upwardly revised deficit of $65.7 billion (from -$67.4 billion) in August.
- The key takeaway from the report is that exports were $2.8 billion less than August exports while imports were $4.8 billion more than August imports, reflecting in part the comparatively weaker activity abroad versus the activity in the U.S.
-- Patrick J. O'Hare, Briefing.com
Booking Holdings checks in with solid gains as resilient travel demand fuels another beat (BKNG)
Booking Holdings (BKNG) became the latest travel company to show that the desire to travel is still greater than the fear of an economic downturn, even as rising interest rates and inflation continue to cut into consumers' spending power. Last night, the company easily surpassed analysts' Q3 EPS and revenue expectations as gross bookings jumped by 36% yr/yr to $32.1 bln. Looking across BKNG's key metrics, it's hard to find any sign that travel demand is waning at all. In fact, it appears that momentum is only building as we head towards the holiday season.
- During the earnings conference call, CEO Glenn Fogel noted that October room nights have increased by 12% versus 2019, representing a modest improvement from September's growth of 10%. Additionally, Fogel stated that customers haven't been trading down to less expensive hotels and haven't reduced the length of their trips.
- This is evidenced by BKNG's strong ADR growth of 28% on a constant currency basis. Travelers are quite willing to pay higher prices for accommodations and flights and BKNG doesn't see this trend subsiding in Q4.
- The two key drivers fueling this strong demand are pent-up demand for travel coming out of the pandemic, and a healthy amount of savings in consumers' banking accounts -- partly due to prior stimulus packages.
- Geographically, the U.S. continues to outperform other regions with bookings up by a robust 35%. However, it's encouraging to see that Asia -- which has been afflicted by COVID-related lockdowns -- generated high-single digit growth in Q3. In September, bookings in Asia surpassed pre-pandemic levels for the first time.
- This resiliency of demand and strength in gross bookings is having a significant positive impact on BKNG's profitability. For the quarter, adjusted EBITDA grew by 26% yr/yr to a quarterly record of $2.66 bln. Although the company's Q4 guidance for adjusted EBITDA of $1.1 bln fell a bit short of analysts' expectations, it still equates to solid yr/yr growth of 17%.
- The company has generally kept its expenses in check. For instance, marketing as a percentage of gross bookings was roughly in line with 3Q19 and was better than its internal expectations.
- One of the few negatives is an item that's out of BKNG's control. Specifically, foreign exchange impacts are creating a considerable headwind with BKNG estimating FX to pressure Q4 bookings growth by about 18%. Also, if not for FX, the company believes that Q4 adjusted EBITDA would exceed the 4Q19 mark of $1.26 bln.
BKNG's strong results certainly don't come as a surprise. Virtually every airline that reported earnings highlighted the strength and resiliency of travel demand. Although Airbnb (ABNB) suffered a sell-the-news reaction to its earnings report earlier this week, its results were also quite strong. At this point, it looks like clear skies ahead for BKNG as consumers show no signs of reining in travel spending, even as macroeconomic headwinds persist.
eBay has plenty of bidders as Q3 results exceed relatively low expectations (EBAY)
eBay (EBAY +1%) is seeing a solid amount of bidders today after delivering upside on its top and bottom lines in Q3. Although eBay was coming off its largest earnings beat in five years last quarter, expectations were not very high, leading into its Q3 report. Many organizations, including e-commerce giant Amazon (AMZN), discussed moderating sales growth during the quarter. However, this low bar, combined with surprisingly good numbers from eBay, is helping fuel a favorable reaction today.
- One of the strong numbers came from eBay's ads business, which saw sales jump 22% yr/yr. The strength of eBay's ads business was the primary fuel behind its revs falling by only 4.8% to $2.38 bln.
- A critical component of eBay's ads business is that its attention is on first-party ads, as opposed to industry peers, like AMZN, Alphabet (GOOG), and Meta Platforms (META), which are reliant on third-party ad revenue. This gives eBay an advantage as it only needs to focus on providing the tools necessary for its sellers to promote their listings on the platform.
- Another area of strength was Gross Merchandise Volume (GMV), which fell by 11% yr/yr to $17.7 bln, surpassing eBay's prior guidance of $17.0-17.6 bln. GMV also accelerated from Q2 by around 9 pts on an FX-neutral basis, although this was mainly due to easier comps.
- Focus categories and refurbished goods remained significant contributors to GMV exceeding prior guidance, as favorable trends from Q2 maintained their momentum. For example, excluding trading cards, focused categories GMV outpaced the rest of the platform by over 7 pts, boasting 20% growth since 2019. Meanwhile, trading cards volume has more than doubled since 2019.
- TTM Active Buyers, an important metric for eBay, did fall 11% yr/yr and 2% sequentially to 135 mln. However, the figure fell at a decelerating pace for three straight quarters, an early sign of possible stabilization.
The main takeaway is that eBay is beginning to find success despite the challenging economic environment. However, issues are still present, such as serious weakness in Europe and FX headwinds. Also, U.S. GMV growth slowed during October compared to 2019 levels. Nevertheless, with EBAY guiding to Q4 adjusted EPS of $1.03-1.09, revs of $2.42-2.50 bln, and GMV of $17.5-18.1 bln, each representing an acceleration from Q3 at their midpoints, investors are willing to shrug off these rough spots. As inflation remains a sore spot in the global economy, EBAY is well positioned to benefit from more sellers looking to raise cash and buyers looking for less expensive refurbished and used items.
Etsy's unique platform and asset-light model helps company to defy the odds again (ETSY)
Etsy's (ETSY) 3Q22 headline net loss of $7.62/share may not look pretty, but that GAAP result doesn't tell the true story of how the company's quarter played out. Looking beyond the $1.0 bln impairment charge to goodwill that dragged net income lower, ETSY produced another solid and steady performance in the face of stiff macroeconomic headwinds. Revenue growth remained in double-digit territory (+12%), easily beating analysts' estimates (+6%), while gross merchandise sales (GMS) of $3.0 bln came in at the high end of ETSY's guidance range. Furthermore, in a time when many retailers are ratcheting guidance lower, ETSY's Q4 revenue outlook of $700-780 mln fell right in line with expectations.
Not including this quarter's non-comparable EPS number, ETSY has topped earnings and revenue expectations for ten consecutive quarters. During this stretch, the company has generated positive top-line growth in every quarter, despite lapping triple-digit growth rates in the quarters of 2Q21-1Q21. In other words, ETSY's business hasn't only proven to be sustainable in the wake of the pandemic, but it's actually thriving and has emerged as a clear winner in the e-Commerce space.
- A mix of unique characteristics and strategic investments are bolstering ETSY's success.
When consumers flooded its platform during the pandemic to search for masks, games, and home decorations, many of those people became captivated by shopping for one-of-a-kind, handmade items. That desire to browse and shop on ETSY's platform has likely been amplified by runaway inflation that has caused many traditional retailers to significantly raise prices.- Individual sellers who aren't beholden to meeting earnings and margin forecasts can be more lenient on pricing.
- To put this shopper migration into perspective, ETSY disclosed that the number of active buyers on its platform has doubled to $88.3 mln since 2019, while repeat buyers now account for 49% of the total, up 800 bps since 2019.
- Simultaneously, ETSY has invested in the user experience, making the platform more user-friendly and efficient. As an example, the company recently rolled out a new way for shoppers to search for items by using an image rather than using words. This was an intuitive addition because it's oftentimes difficult for users to describe exactly what they are looking for on ETSY.
- Additionally, the company incorporated prices into search algorithms, increased the prominence of reviews in search results, and is testing a "Star Seller" feature.
- Although ETSY has prioritized platform improvement investments, it has taken a conservative approach with its operating expenses. In Q3, total operating expenses were up a reasonable 11.5% yr/yr to $329 mln (excluding the goodwill impairment charge to Depop and Elo7). Two key advantages working in ETSY's favor relative to other retailers is that it doesn't hold inventory and that it has a small physical footprint.
- This asset-light model helped the company to generate Q3 adjusted EBITDA and cash flow from operations of $167.8 mln and $206.6 mln, respectively.
While ETSY isn't completely immune to macroeconomic volatility, it's business model and the treasure-hunting shopping experience on its platform are providing it with an edge over other retailers and e-Commerce companies. With momentum at its back, we believe that ETSY is poised for a strong holiday shopping season.
Roku streams sharply lower after providing weak Q4 guidance, ad market looks bleak (ROKU)
Roku (ROKU -10%) is streaming sharply lower today after its Q3 earnings report last night. Roku reported a narrower than expected loss in Q3 with nice upside revenue. However, there was also weak Q4 guidance and cautious commentary on ad spend. Roku also announced that CFO Steve Louden plans to leave the company sometime in 2023.
- The Q4 guidance was pretty rough with the $800 mln revenue outlook being well below consensus. Roku also expects a large Q4 adjusted EBITDA loss of $(135) mln vs $(34) mln in Q3. The holiday season is typically the strongest period for Roku, but not this year. Roku expects macro uncertainties and inflation will continue to hurt consumer discretionary spend. This will in turn further weigh on ad budgets, particularly the ad scatter market. Also, Q4 is typically back-end loaded, which reduces visibility.
- Roku expects these conditions to be temporary but concedes it is difficult to predict when they will stabilize or rebound. On its Player segment, Roku expects Q4 sales to be lower yr/yr and margins will be significantly lower sequentially primarily due to traditional holiday promotional pricing.
- To make matters worse, Roku did some robust hiring in late 2021 and early 2022 when it believed the economy was emerging out of pandemic-related disruptions. It also accelerated some investments that had been previously deferred. These were not smart moves in retrospect. Roku has significantly slowed its rate of hiring, but it will take a few more quarters for this OpEx growth rate to normalize.
- It was not a big surprise that online ad spending would be weak as the topic has been well-covered in recent weeks. SNAP reported weak results on October 20 that took the whole group down. Then META and GOOG had weak results and expressed concerns about the ad environment. We think what is different here is the magnitude of the Q4 shortfall.
- Roku has been smartly branching out into non-advertising areas. It recently launched a smart home subscription business, which includes cameras and video doorbells. Roku is the #1 smart home brand by shelf space in nearly 3,500 Walmart stores. While this holds promise long term, this segment is peanuts relative to Roku's primary ad business.
Overall, investors are clearly disappointed with Roku's Q4 guidance. We think what further spooked investors is that Roku is usually pretty cheery on its calls even when the numbers are not the best. However, management was uncharacteristically somber in terms of its Q4 outlook on this call. Briefing.com thinks it is pretty risky to be bottom fishing down here. This ad weakness could easily extends into 1H23. The timing is not great for Netflix (NFLX), which will launch its ad-supported tier next month.
Qualcomm sells off on dismal DecQ guidance as customers drawdown inventory (QCOM)
Qualcomm (QCOM -6%) is in a rut today after guiding Q1 (Dec) earnings and revs considerably below analysts' forecasts. The market is well aware of the waning consumer electronics demand and the early innings of demand slowing within the industrial market. However, QCOM still shocked investors with the specific impact these challenges had on its financials.
- The main issue is QCOM's large customers drawing down their inventory. The company estimates that there are around eight to ten weeks of elevated inventory, translating to a couple of quarters before conditions moderate, with Q1 seeing the bulk of the impact.
- As a result, QCOM projected Q1 EPS of $2.25-2.45 and revs of $9.2-10.0 bln, representing a 10% decline yr/yr, QCOM's worst quarter since 4Q19. The company noted that the inventory drawdown is taking an approximately $0.80 bite out of its Q1 EPS projection. However, even if this impact is added back in, it still falls short of analyst expectations.
- Another discouraging development is that current economic woes are beginning to seep into QCOM's premium tier handsets and consumer internet-of-things (IoT) devices. It seemed as though premium categories were better cushioned against the inflationary environment.
- For example, Apple (AAPL) benefited from a mix shift toward its more premium Pro iPhone models in SepQ, while PC maker HP Inc (HPQ) saw more impact on low-priced items rather than premium ones less than two months ago.
- To manage these headwinds, QCOM implemented a hiring freeze and has planned spending cuts across its mature product areas. It is also remaining fluid on additional actions to reduce operating expenses. Despite this, QCOM noted it will focus on optimizing its R&D investments to maintain growth within automotive and industrial IoT.
It was not all doom and gloom, however. Automotive remained a bright spot, boasting 58% growth yr/yr in Q4. QCOM also reiterated its Automotive Investor Day targets as the company's over $30 bln design pipeline materializes. QCOM also expects to see an inflection point in Windows on Snapdragon PCs (QCOM's chipset brand) in 2024 based on several design wins. Furthermore, long-term tailwinds remain strong, including 5G wireless fiber, partiaculy in developing economies like India, and the ongoing digital transformation, driving connectivity at the edge.
Still, investors are discouraged by the inventory glut drastically hurting QCOM's Q1 outlook. There are also concerns that these issues could linger beyond Q1, especially if economic conditions remain poor. However, over the long term, we remain bullish on QCOM as it is still on track to expand its total addressable market by over 7x over the next decade, fortifying its already massive global footprint.
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