Qualcomm For The Win?

| About: Qualcomm Inc. (QCOM)

It's quite a competitive market out there for gadget manufactures. A mobile and computing revolution is taking place at this very moment. Luckily for companies like Qualcomm (NASDAQ:QCOM), the bigger the industry gets, the better and more stable it becomes. Qualcomm is the manufacturer and supplier of chips in various computers and mobile devices. This is one of the very few companies that has overachieved what analysts expected over the past few years. As of now, growth and huge profits is all that investors see in this company. The recent hike in the price value of the company has resulted in the company trading at a premium. I personally see a lot more potential profits in the long run, why?

Qualcomm's recent performance

Qualcomm amazed its investors with its sky high Q1 2013 performance. Earnings per share for the company came in at $1.26, this is 30% above the previous figure a year ago. Revenue of the company was up by 29% reporting another record quarter. I started monitoring Qualcomm solely because of the fact that Apple (NASDAQ:AAPL) has most of their chips designed by these pioneers. Despite the fact that Apple had to cut down the orders, Qualcomm was able to push across 182 million MSM; this was well above what the company expected. Apple, as of now, is going through a phase where investors are skeptical whether Apple would reach its peak again soon. After Apple's dip in share value, the share price has been hovering at about $470 to $480. Despite Apple completely missing out on their EPS estimates, the company seems to look healthy at the start of this quarter. Why is Qualcomm not affected by all of this? Well, Qualcomm caters to other tech giants as well. This is why Qualcomm has a bright future, irrespective of the competition between tech giants, it's always a win-win situation for Qualcomm.

Qualcomm manufactures processor chips and with various digital equipment for companies like Apple, Samsung and other such big names. Qualcomm boasts of a dividend yield of 1.5% and a market cap of $110 Billion. Yes, Qualcomm is a bit volatile and has been fluctuating at 8% with a beta of 1.25, but Qualcomm has a pretty neat balance sheet with over $12 Billion in cash and a comparatively mere $60 million debt.


Despite the industry P/E average being 14.67, Qualcomm is still trading at a premium of 18.22. Qualcomm has an operating margin of 30%, and with the way they're running the show, a rise in this figure is likely. Qualcomm's ROE is at 17.46, a decent figure. NVIDIA (NASDAQ:NVDA), a potential competitor to Qualcomm's mobile chips seems to be inspired by Qualcomm's performance so far. NVIDIA is trying to make a switch from manufacturing PC chips to becoming a strong competitor in the mobile processing arena. NVIDIA presently is trading at 15.38x earnings and a disappointing 1.87 to sales. Though NVIDIA's Tegra series of mobile processing units seem to have created quite a buzz, they have failed to match Qualcomm's market share and margins.


It's a dog eat dog world out there as far are giants like Samsung and Apple are concerned, but companies like Qualcomm are having a ball. The tougher the competition gets for Samsung and Apple, the better it gets for Qualcomm. Earnings for the company were up at double digit figures again. Despite the tough macro-economic conditions, Qualcomm has a very bright and sunny road ahead.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.