Investing.com -- Qualcomm's stock slipped 2.2% on Tuesday and has declined another 0.9% premarket Wednesday after Citi analysts placed the company on a negative catalyst watch, citing weaker handset demand and other headwinds in its latest note.
Citi expressed concerns about cooling PC and wireless demand—two key sectors that together represent 38% of semiconductor demand.
"There is also excess inventory in the handset end market (17% of semi demand), which could be a headwind for Qualcomm (NASDAQ:QCOM)," Citi noted, highlighting potential challenges for Qualcomm in the coming quarters.
The analysts warned that these issues could contribute to lowered forecasts for QCOM's December quarter.
Adding to Qualcomm's challenges, Citi cited the potential loss of Apple (NASDAQ:AAPL) as a customer beginning in 2025 as another downside risk.
"We are launching a negative catalyst watch on QCOM, given our expectations of lowered forecast in addition to Apple going away beginning in 2025." the analysts stated, indicating concerns about further revisions to earnings estimates.
Citi said its own estimates for Qualcomm's December quarter are 11% below consensus, reflecting the company's vulnerabilities.
The broader semiconductor sector is also facing challenges, according to the bank. Citi predicts a muted third-quarter earnings season.
"We expect aggregate Consensus estimates to decline during 3Q24 earnings season," Citi said, referencing cooling demand in the PC and wireless markets as well as worsening conditions in the automotive sector.
While AI demand remains a bright spot for the semiconductor industry, Citi is adopting a more cautious outlook through the end of 2024.
ADI emerged as Citi's top pick as the analysts shift to a defensive stance in the sector, alongside other Buy-rated names like AMD (NASDAQ:AMD), AVGO, and MU.
With Qualcomm facing multiple headwinds, Citi's negative outlook could place further pressure on the stock.