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QUALCOMM (QCOM) earnings preview: tepid revenue projections

Carla Olson | 12:57 am ET, 23 Jul 2018

QUALCOMM (QCOM) is expected to report earnings on July 25 after market close.  The report will be for the fiscal quarter ending June 2018.  Shares are trading at 58.35, down -0.07%.

What are QCOM earnings expectations?  What news will the market be watching out for?  

Analysts expect Qualcomm’s licensing business to show a solid growth, because of increased 3G and 4G device adoption. However, recent government investigations into the business model and the Apple lawsuit against Qualcomm’s business practices have increased the possibility of negative effects on royalty revenue. Qualcomm may be able to withstand these inquiries and maintain adequate royalty rates.

Qualcomm is a steward of the digital communication technology known as CDMA, which is commonly referred to as a third-generation, or 3G, wireless communications standard. 3G allows devices to send/receive voice signals and wireless data, and has played a major role in the proliferation of mobile devices. Qualcomm’s treasure trove of patents (with a monopoly in 3G and a significant portion of 4G) allows the firm to charge device-makers a royalty fee as a percentage of the price of each 3G and 4G device sold (as most 4G phones are backward-compatible with 3G).

The firm also designs chips used in smartphones. This part of the business does not have nearly as strong of a competitive advantage as licensing, nor is it as profitable. Qualcomm’s high-end Snapdragon application processors were once commonplace in high-end smartphones, but the shift toward in-house chips has threatened Qualcomm’s position. The major blow occurred when Samsung utilized internally developed chips in its Galaxy S6 device. 

While Qualcomm has reclaimed some business back at Samsung, there will be fewer lucrative opportunities going forward, owing to competition and OEMs that build their own chips. The firm historically also had a competitive edge in baseband chips, which are critical to devices’ inherent ubiquitous connectivity. Qualcomm had been the sole baseband supplier at Apple for multiple iterations of the iPhone, but Intel has since won a portion of this business. 

QUALCOMM Incorporated has a history of beating analysts’ earnings estimates. In the past four quarters, the company: 

  • Beat analyst EPS estimates by 2 cents ($.83 actuals vs. $.81 forecast) in FQ3’17;
  • Beat analyst EPS estimates by 11 cents ($.92 actuals vs. $.81 forecast) in FQ4’17;
  • Beat analyst EPS estimates by 8 cents ($.98 actuals vs. $.90 forecast) in FQ1’18;
  • Beat analyst EPS estimates by 10 cents ($.80 actuals vs. $.70 forecast) in FQ2’18.

For FQ3’18, EPS is expected to decline by 14% year-over-year to $.71, while revenue is expected to decline 2% year-over-year to $5.2 billion.  

Over the last month, QUALCOMM (QCOM) returned -2.52%. 

QUALCOMM (QCOM) average analyst price target ($63.41) is 8.67% above its current price ($58.35).

For the latest price and information on QUALCOMM, please visit Finstead and search for "QCOM price" or "QCOM news".

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.

Broadcom Mum On Qualcomm, But Expected To Raise Price?

Carla Olson | 2:37 pm ET, 08 Dec 2017

Broadcom AVGO

Broadcom (NASDAQ: AVGO) reported solid fiscal fourth-quarter earnings and provided investors with a forecast for the January quarter that was relatively in line with analysts' expectations after factoring in the firm's recent acquisition of Brocade. 

Business conditions still appear quite healthy across most end markets, as the Company will continue to reap the benefits of content gains within Apple's latest iPhone series. Longer term, with Brocade in the fold, the Company also raised a couple of its long-term profitability targets. 

Broadcom management said little on the call about Qualcomm, but we continue to believe that such a deal would be materially accretive to Broadcom. Broadcom may be able to raise its bid price as high as $80 per share and still find the acquisition to be quite accretive. 

Broadcom's revenue in the October quarter was $4.84 billion, up 9% sequentially and 17% year over year and ahead of the midpoint of the firm's previous guidance of $4.80 billion as discussed in early September. 

Wireless revenue was the bright spot, up 33% year over year and up 40% sequentially, again thanks to Broadcom's content gains within Apple's latest iPhones. 

Enterprise storage revenue appears to be cooling off, particularly for chips used in storage hard-disk drives, with sales down 12% sequentially but still up 15% year over year. 

The Firm's largest segment, Wired Infrastructure, saw sales rise 3% year over year but were down 3% sequentially.

Over the last year, AVGO has returned +56.40%. This return is higher than Technology Sector (25.12%), Semiconductor - Broad Line Industry (25.97%), and S&P 500 (17.65%) returns.

Based on Finstead research, AVGO average analyst price target is $295.04 (visit Finbot and type "AVGO price target").

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.

QUALCOMM Incorporated (QCOM) Buy or Sell Stock Guide

Updated at: 12:56 pm ET, 12 Jun 2019

Are you looking for the analysis of QUALCOMM Incorporated (QCOM) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 9 reasons to buy and 10 reasons to sell QCOM stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about QCOM stock:

  • Is QCOM a buy or a sell?
  • Should I sell or hold QCOM stock today?
  • Is QCOM a good buy / investment?
  • What are QCOM analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy QCOM stock:

1. Qualcomm collects royalty income on the majority of 3G and 4G handsets sold, as it holds virtually all essential patents used in these networks.

2. Barring legal or regulatory challenges, Qualcomm’s royalty revenue should grow along with the overall smartphone market, even as much of the market growth will come from entry-level phones.

3. Qualcomm is the clear market leader in wireless chips, with a leading market share position in 4G LTE chipsets and relationships with every prominent smartphone maker.

4. Qualcomm is one of the largest manufacturer of wireless chipset based on baseband technology. The company has been trying to retain its leadership in 5G, chipset market and mobile connectivity with multiple technological achievements and launches. Qualcomm, Verizon and Ericsson jointly completed the first Massive MIMO (Multiple Input-Multiple Output) trial with a fully-compatible customer device.

5. Qualcomm is very close toward its proposed acquisition of Netherlands-based mobile chipset giant NXP Semiconductors N.V. NXP Semiconductors is a leading manufacturer of high-performance, mixed-signal mobile chipsets. The company has a strong clientele serving more than 25,000 customers through its direct sales channel and global network of distribution channel partners.

6. For Qualcomm, associating with China’s leading smartphone manufacturers means additional royalties. The company has signed multiple licensing deals with various Chinese smartphone makers including Xiaomi. With these deals, Qualcomm intends to extend its pledge to constantly aid in the growth of Chinese companies and develop wireless networks, devices and applications.

7. QCOM forward dividend yield is 2.88%, higher than the industry (0.53%) and sector (0.23%) forward dividend yields. See QCOM forward dividend chart.

8. QCOM average analyst rating is Buy. See QCOM analyst rating chart.

9. QCOM average analyst price target ($88.95) is above its current price ($69.82). See QCOM price target chart.

Now that you understand the bull case, let’s look at the reasons to sell QCOM stock (i.e., the bear case):

1. Qualcomm’s chip business faces a host of challenges, from share loss at Samsung and Apple, to some of its customers developing mobile processor IP and design expertise in-house, which may shrink the firm’s potential customer base.

2. Qualcomm's licensing business faces regulatory scrutiny in the U.S., Taiwan, and, most importantly, South Korea, a region whose preliminary ruling suggests that royalties should not be based on the full price of the phone.

3. Qualcomm is being sued by Apple in a case that could negatively affect the firm's licensing business.

4. Qualcomm’s first quarter fiscal 2018 and fourth quarter of fiscal 2017 GAAP and Non- GAAP results were negatively impacted by its continuous dispute with Apple and its contract manufacturers (who are Qualcomm licensees), as well as the previously disclosed dispute with another licensee.

5. Qualcomm has been facing three major problems in its business lately. Secondly, a shift in the share among OEMs (original equipment manufacturer) at the premium tier has reduced Qualcomm’s near-term opportunity to sell integrated chipsets from the Snapdragon platform. Finally, intensified competition in the Chinese market has added to the concerns.

6. The $1 billion lawsuit related to licensing royalty payments, filed by tech giant Apple Inc. (in Jan 2017) against Qualcomm with the U.S. District Court for the Southern District of California, is getting uglier day by day. Since Jan 2017, there had been a number of counter attacks from either side. Initially, Apple had accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates.

7. Aggressive competition in the mobile phone chipset market may hurt Qualcomm’s profits in the future. The company is facing severe competitive threat from its closest rival, Intel, which has been redesigning its chipsets for the mobile computing market. Intel started delivering multi-mode LTE baseband modem. Competition is also likely to emanate from formidable rivals like Broadcom and Nvidia.

8. QCOM quarterly revenue growth was -4.60%, lower than the industry and sector average revenue growth (5.81% and 5.21%, respectively). See QCOM revenue growth chart.

9. QCOM profitability is declining. The YoY profit margin change was -32.46percentage points. See QCOM profitability chart.

10. QCOM Price/Book ratio is 20.98, and it’s high compared to its industry peers’ P/B ratios. See QCOM forward Price/Book ratio chart.

Now let's look at the key statistics for QCOM:

Metrics QCOM
Price $68.72
Average Price Target / Upside $88.95 / 29.44%
Average Analyst Rating Buy
Industry Semiconductors
Sector Technology
Number of Employees 35,400
Market Cap $83.54B
Forward P/E Ratio 13.09
Price/Book Ratio 3.92
PEG 0.66
Revenue (TTM) $21.30B
YoY Quarterly Revenue Growth -4.6%
Profit Margin 11.83%

What are your thoughts on QCOM?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.

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