|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
It’s Win-Win for Qualcomm
Posted by: Muhammad Bazil (IP Logged)
Date: November 30, 2012 09:22AM
If there is one company that is benefiting from the rising competition in the smartphone market, it is Qualcomm (QCOM). The company has been performing above expectations, and it seems to be in no hurry to let go of that status.
Qualcomm Discloses Strong Numbers for Q4 FY2012
Qualcomm disclosed the financial information for its fourth quarter for the financial year 2012 with very strong numbers. The revenue of the company has increased by 18% as compared to the same quarter in the financial year 2011 and the net profit of the company increased by 20%. The company is the primary manufacturer and supplier of chipsets for smartphone and similar devices. The company also receives licensing revenue from its licensed operations all around the globe.
Due to the excessive demand for its chipsets, the company faced a shortage of supply; however, the shortage of supply has been addressed as the company sought assistance from additional suppliers in the quarter. The major demand overhaul came from the launch of iPhone 5 and the new iPad. It can be said that a major factor behind the extensive demand for Qualcomm’s chipset was the launch of these two devices. These devices by Apple (AAPL) are immensely popular all around the globe and any launch by Apple also creates a sudden rise in demand for the complementary products.
Factors Influencing Qualcomm’s Market Performance
The only factor that had kept the market value of the company’s stock from rising was the doubt regarding the efficiency of its supply chain. The company had been unable to meet the demand of the market; however, the recent modifications in its supply chain have enabled the company to deliver in accordance with the demand. Although Qualcomm was unable to meet the demand throughout the year, the overall sales of the company increased by 28% in the financial year 2012. This fact reveals the extensive potential for the company and the extent of opportunity available for it in the market. Had the company been able to meet the demand, its overall revenue would have been much higher.
When the situation regarding the supply chain was addressed, the only factor suppressing the market value of the stocks was gone and the stock of the company witnessed a rapid surge of 7%. According to market experts, the company's stock price is expected to rise even more as the prospects for Qualcomm's financial performance are better than ever.
Factors Influencing the Financial Performance of the Company
There is no shortage of factors that are responsible for pushing the revenue and net profit of Qualcomm. One of the major factors is the growth of the smartphone and tablet market in the past two years. A significant number of users have switched to smartphones in these two years causing a rise in their sales, and therefore a rise in the sales of Qualcomm’s chipsets.
What is keeping the growth alive is the continuous innovation in the market. The demand for 3G devices is on the rise, and users who shifted to 2G smartphones from feature phones are now shifting toward 3G devices. The major carriers in the country, i.e. Verizon Wireless (VZ) and AT&T (T), have also widened their product lineup with regard to smartphones.
Another factor is the rising competition in the market. Where on one hand, smartphone companies like Apple, Samsung and Nokia (NOK) are fiercely competing to retain their market share, Qualcomm is benefiting from the situation as most of the smartphone manufacturers depend upon the company’s chipsets. Qualcomm has managed to establish goodwill for its brand among the users, and this is also one of the reasons why more and more smartphone manufacturers are turning towards Qualcomm for their chipset requirements.
The financial performance of the company is expected to follow the same trend in the future because the trend in the growth of the tablet market is expected to continue. The tablet market witnessed growth of 250% in 2011, and this growth is expected to continue till 2016. Another factor supporting the extended positive financial performance of the company is the launch of smartphones using Windows 8. Qualcomm’s association with Microsoft (MSFT) will be a major support for the company’s financial growth.
Investors should buy the company’s stock as the market value of the stock is expected to rise even more. All the market factors are in favor of the company and the upward trend in profitability is expected to continue in the future financial periods. This continued profitability will push the market value of the stock.
Stocks Discussed: QCOM, NOK, T, VZ, AAPL,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.