Qualcomm, Inc. (QCOM) Stock Is All Charged Up
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In the last quarter, markets bid Qualcomm, Inc. (NASDAQ:QCOM) up in the single digits. The stock underperformed the Nasdaq Composite index, which rose around 9%, compared to 6.6% for QCOM stock.
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Instead of worrying over litigation and antitrust investigations against Qualcomm, shareholders should turn their attention on the company’s fiscal third-quarter results.
A Look at Qualcomm’s Second Quarter
In the second quarter, Qualcomm earned $1.34 per share on revenue of $6 billion, beating consensus estimates. QCOM ended the quarter with cash (and cash equivalents) of around $29 billion.
The company benefited from its partners refreshing smart phone devices. Samsung (OTCMKTS:SSNLF) announced the Galaxy S8 and s8+ would use the new Snapdragon 835 chip. Sony Corporation’s (NYSE:SNE) Xperia XZ premium and Xiaomi’s Mi 6 also announced it would use that same chip.
Companies in China continued to drive QCOM’s revenue. Over 200 devices are using the Snapdragon 600 and 400 platform.
Third-Quarter Forecast for QCOM Stock
On April 19, Qualcomm forecast revenue of between $5.3 billion and $6.1 billion and non-GAAP earnings of between 90 cents and $1.15 per share for the third quarter. Investors must remember that Qualcomm later issued a revenue forecast below the $5.9 billion consensus due to its uncertainty over Apple Inc.’s (NASDAQ:AAPL) contract manufacturers underpaying royalty fees.
Telstra launched the first gigabit LTE network, so adoption of Snapdragon X16 Gigabit LTE modem may lift Qualcomm’s revenue this quarter. Since Samsung Galaxy S8 uses this chip, chances are good that the company will report strong sales from that area. Management has high expectations for Gigabit LTE’s growth potential. 5G, NR, multimode and millimeter wave are also important technologies that QCOM is investing in. In the years ahead, this will keep the company relevant in the smart phone business.
5G will not drive revenues higher in Q3 but investors will want to listen to management’s outlook on the technology. QCOM leads in 5G technology. The smart phone product refresh to 5G benefits the company. For now, the company is conducting trials for 5G technology with Ericsson (NASDAQ:ERIC), AT&T Inc. (NYSE:T) and Vodafone Group Plc (ADR) (NASDAQ:VOD).
Favorable Valuation Ahead of QCOM’s Earnings Report
QCOM stock is going into its earnings at a forward price-to-earnings ratio of 15 times and a P/E of 18.7 times. With $21.22 per share in book value and $6.76 a share in cash, Qualcomm is very appealing for value investors. But its spat with Apple is creating a cloud of uncertainty over the royalty rates. A FTC antitrust lawsuit against the company is hurting the stock price, too.