Qualcomm Incorporated (Ticker Symbol: QCOMWealth Strength IndexAAPL is Extremely Up and trending Up) released quarterly revenues that missed analysts’ expectations as well as lowering guidance for the remainder of the year. The San Diego, Calif.-based company reported an earnings per share beat of .80 cents per share vs. Wall Street analysts’ expectations of .75 cents per share. However, the tech giant reported a revenue miss of $4.89 billion vs. Wall Street analysts’ expectations of $5.08 billion.
Qualcomm also adjusted its guidance for the rest of the year. The company will now be looking for earnings to be between .65 and .75 cents per share and revenues between $4.3 billion and $5.1 billion vs. earnings per share of $1.08 and revenues of $5.63 billion that Wall Street analysts’ were expecting.
Qualcomm landed Apple as its customer again and will be making chips for its iPhones, which will enable them to obtain revenue from each iPhone sale. Additionally, the company should get a boost in sales because Qualcomm is the leading global supplier of 5G chips and most smartphones are now 5G compatible. However, some analysts feel as if Qualcomm’s stock is overpriced because it is currently trading at 23-times its forward earnings, while the rest of the semiconductor space is trading at an average of 15-times forward earnings.
Above is a longer-term weekly chart of Qualcomm’s stock over the past ten years. The stock spent the majority of 2009 and 2010 recovering from the financial crisis. Qualcomm’s stock began to find some life at the start of 2011 and broke above its downtrend. The stock found price support multiple times at its 100-week simple moving average while forming a two-year-long ascending triangle. Ascending triangles are triangles that are usually bullish, where the top part of the triangle appears flat and the bottom part of the triangle has an upward slant. Buyers come in at the lows and prices move higher, then prices make a higher low and retest the old highs. The stock eventually broke out of its triangle to the upside in the fourth quarter of 2013.
The move was short-lived and the stock pulled back nearly 50% and found some price support around the $44.00 price level. Early in the first quarter of 2016, the stock found a temporary bottom, forming a bullish divergence pattern, where the stock makes a lower low in price but the Relative Strength Index makes a higher low as indicated on the chart by the yellow lines. Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Qualcomm’s case. The stock spent the next three years in a trading range between roughly the $50.00 and $75.00 price levels. Currently, the stock is trading above both is 100 and 200-week moving averages.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 16 analysts offering 12-month price targets, the average price target for Qualcomm’s stock is $78.93. According to that number, the stock is priced at a slight discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $78.35.
Qualcomm has been a favorite semiconductor stock for institutional investors not only for its dividend but for its intellectual property and growth as well. In the past, the company had some failed acquisitions and legal disputes that were hindering it from growth. These hindrances seem to be behind the company and the future looks bright.
Investors in the space should look to Qualcomm’s next earnings release on November 6th for fresh news within the company.