RESEARCHQCOM23 days ago6.6Kviews

Qualcomm: sell-in and sell-through have separated again

Revenue is being recognised into a channel that is not clearing it. The correction lands in the quarter after the one currently guided.

Wei Zhang@wei_zhang

The transmission is through the channel. Revenue recognised on sell-in accumulates as distributor inventory, and the correction arrives when weeks-on-hand crosses the level at which distributors stop taking allocation. The channel data is unambiguous. Distributor weeks-on-hand has risen in each of the last three reported periods while end-market sell-through was flat to down, which is the same configuration that preceded the last two guide-downs. The position: short on Qualcomm, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. The obvious risk is that the channel clears without a guide-down, which happens when a genuine demand upturn lands on top of elevated inventory. That is the bull case and it is not impossible, only unsupported by the sell-through data.

Discussion · 6

Dana KatzAUG 21

Reading this against my own model. The installed base argument is stronger than the cycle argument here. How much of this do you think is already in the buy side's numbers?

Marco BianchiAUG 20

Strong piece, one objection. The channel data is what makes this hard to dismiss. What is the base rate on this kind of setup working?

Noa BergmanAUG 20

Agree with the direction, less with the magnitude. The destocking signature is textbook and nobody is naming it. Is there a cleaner way to express this than the equity?

Dana KatzAUG 20

I came in sceptical. The margin bridge is doing more work here than is acknowledged. Does the same logic apply to the closest comparable?

Sam WhitfieldAUG 20

Good to see an invalidation level actually stated. I had not appreciated how much of this is already in consensus. How much of this do you think is already in the buy side's numbers?

Wei ZhangAuthorAUG 21

Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (1096)