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Mark Yu
Mark Yu
Articles (429)  | Author's Website |

Qualcomm Stock Reaches Decade High After Shipments Drop 34%

Buy recommendations seem unwarranted

November 14, 2019 | About:

Shares of chip developer and manufacturer Qualcomm (NASDAQ:QCOM) reached decade highs after the company reported its fiscal year 2019 results. Despite a good amount of shipment reduction on its chips, Qualcomm beat Wall Street earnings expectations, so the stock has soared to new heights as a result.

For its fourth quarter, the $113 billion market cap, San Diego-based chipmaker reported a 22% decline in its revenue to $ 4.81 billion and earnings per share of 78 cents a share compared to Wall Street consensus estimates of 71 cents a share.

In review, Qualcomm may not have beaten estimates if figures were not reduced. Back in July, Wall Street had expectations for Qualcomm to deliver adjusted earnings of $1.09 a share on $5.67 billion in revenue.

Qualcomm’s Mobile Station Modem shipments, which include Mobile Data Modem, Qualcomm Single Chip and Qualcomm Snapdragon mobile platforms and processors and LTE modems, fell 34% compared to a 5% rise during last year's fourth quarter.

Meanwhile, Qualcomm does not see any positive revenue nor earnings growth in its next quarter. The company expects for its revenue growth to drop to -9% to +7% and  its earnings per share to decline by 30%-41%. The company’s shipments are expected to decline between 11% to 22% in the coming quarter.

The company also carries a slightly leveraged balance sheet, with $15.9 billion in debt, $4.9 billion in equity and $12.3 billion in cash.

Rising 12% for the week after the earnings announcement, Qualcomm is trading at 16 times forward earnings compared to its five-year average of 15 times and 22 times its book value compared to its average of 8 times. Nonetheless, the stock remains a favorite among Wall Street as 14 analysts (up from 12 last quarter) rate the company’s stock a buy. The Street even came out with an article entitled, “Qualcomm's Numbers Beat Expectations, so Buy on Strength.”

Despite the company’s 5G forecast in 2020, Qualcomm’s stock is now trading at decade highs while having experienced continuous decline in shipments and thus a decline in sales, which may be enough to make an investor think twice before buying on strength this time around.

Disclosure: No shares in Qualcomm.

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About the author:

Mark Yu
I'm a doctor in physical therapy (DPT) with an interest in finance. Not a registered financial analyst. Value seeker. Long only. Global investing. Long-term investing.

I attempt to dissect one company filing every day. I dislike goodwill and intangible assets.

One company (review) a day keeps the speculation (hopefully) away.

"The only source of knowledge is experience."

"I have no special talent. I am only passionately curious." - Albert Einstein

"To strive, to seek, to find, and not to yield." - Alfred, Lord Tennyson

"We find one a year, that's terrific. You do not need a hundred or a thousand great investment ideas to do well. You need a couple. And, the discipline is the most important thing." - Warren Buffett

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