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Retail Surprises, but We're Also Watching These 5G-Related Holdings

Let's see how the October sales numbers could impact Coty, and check on Qualcomm, Nokia and AXT Inc.
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We're going to look at Coty (COTY) , AXT Inc. (AXTI) and Nokia (NOK) , but first let's get to the big economic news for the day: the October retail sales report. Headline growth year-over-year registered at 16.3% for retail and food services, well ahead of the expected 13.9% increase.

Stripping out food, and focusing on retail, those sales climbed 14.8% year-over-year with particular strength in food services & drinking places (+29.3% year-over-year), department stores (+27.6%) and clothing & clothing accessories (+25.8%) and gasoline stations (+46.8%). That report keeps our bullish stance on Coty Inc. ahead of its 2021 Investor Day on Thursday.

Taking a closer look at the sequential year-over-year pattern for September and October retail sales, we see a nice tick up in non-store retail sales, food & beverage stores (including grocery stores), auto & other motor vehicle dealers, and building materials. That month-over-month improvement seems to confirm that supply chain issues have improved at least some in October, further supporting the figures we’ve seen from the likes of Ford Motor (F) and other companies.

Qualcomm, AXT and Nokia

Shares of Qualcomm are moving higher, given a number of positive comments at the company’s latest Investor Day. Out of the gate, the company shared its 5G handset shipment forecast though 2024, which calls for more than 1.1 billion 5G smartphones, up from 950 million in 2023, 750 million in 2022 and 525 million this year. Given our comments on increasing RF dollar content per 5G device that will drive demand for compound semiconductor wafers, we see Qualcomm’s comments as rather long-term bullish for our shares of AXT Inc. That same forecast also bodes well in our view for the licensing business housed inside Nokia, and. yes. it's one that has much impact on the company’s bottom line.

Qualcomm also talked about its diversifying revenue stream, including the auto market. The company sees that revenue stream growing to ~$8 billion by the end of the decade, up from $1 billion this year. We suspect the company will leverage its mobile chipset expertise to drive connectivity in the auto sector, while also leveraging its Snapdragon chip technology. To that end, this morning Qualcomm announced it reached a new deal to provide its Snapdragon Ride vision system-on-chip, vision perception and advanced drivers assisted systems central compute SoC controllers for the next generation of BMW’s automated driving stack of technologies. The system will be managed by Qualcomm’s Car-to-Cloud services platform.

For its IoT business, Qualcomm is forecasting revenue growth opportunity of $67 billion by 2024, up from $42 billion this year, which includes the increasingly discussed metaverse as well as augmented and virtual reality applications and industrial connectivity.

We’ll continue to parse Qualcomm’s comments as well a those from Rackspace Technology (RXT) and Cisco (CSCO) later this week as we eye our next move with AXTI shares.

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