Seeking Alpha
Long/short equity, momentum, special situations
Profile| Send Message|
( followers)  

By: Brendan Gilmartin, VP Research & Content

Qualcomm (QCOM) is slated to report 2Q 2013 earnings after the close on Wednesday, April 24. The results are expected to come through at 4:00 p.m. EST, with a conference call slated to follow at 4:30 p.m. Sympathy Plays: Nokia (NOK), Broadcom (BRCM) and Texas Instruments (TXN).

Outliers And Strategy

  • Non-GAAP EPS: For the 2Q 2013 period, Qualcomm previously indicated it expects Non-GAAP EPS of $1.10 to $1.18. Guidance tends to be conservative and actual results tend to come in at the high end of forecasts. The current consensus is toward the high end of this range at $1.16.
  • Revenues: Qualcomm said in January it expects 4Q revenue of $5.80 bln to $6.30 bln, an increase of 17% to 27% Y/Y.
  • Adjusted EPS Guidance and Revenue Guidance (3Q 2013): Guidance for the next quarter will be watched closely, given results for the 2Q 2013 are largely priced into the shares. The estimates are for Adjusted EPS of $1.04 on revenue of $5.88 bln. (Source: Yahoo Finance)
  • At just 13.0x forward earnings, Qualcomm is trading at a discount to historical multiples. With an expected 5-year earnings growth rate of nearly 15%, the FWD PEG ratio is just about 1.0.
  • Over the past several quarters, Qualcomm has benefited from its relationship with Apple (AAPL), supplying chips for the popular iPhone device. In addition, the majority of Android devices run on Qualcomm chipsets.

Recent News

  • 04/10: Sterne Agee reiterated a Buy rating and a $75 price target on Qualcomm, according to a report on Barron's. The firm cited strong chipset shipments from Samsung, HTC and ZTE. As a result, the firm raised estimates for the June quarter, suggesting the guidance from Qualcomm on Wednesday could be fairly upbeat.
  • 04/08: Canaccord Genuity raised the price target on Qualcomm from $83.00 to $85.00, according to a report on Benzinga.com. The positive outlook was based on several factors, including 3G sales growth in emerging economies, solid trends in smartphone and tablet sales, and forecasts for solid earnings growth. The firm also reiterated a Buy rating.
  • 04/02: Raymond James increased its rating on Qualcomm, according to a report on Barron's, suggesting the wireless chip-maker will maintain its advantage in the smartphone market, despite competition from the likes of Intel (INTC) and Broadcom (BRCM).
  • 03/06: Goldman Sachs removed Qualcomm from the Conviction Buy List, according to a post on StreetInsider.com. The firm cited a peak in market share for chipsets in 2013 and decelerating EPS growth beyond in 2014 and 2015.
  • 03/05: Qualcomm approved a 40% increase in the quarterly cash dividend and a new $5.0 billion stock repurchase program to replace the prior $4.0 billion stock repurchase program. The shares are now yielding 2.19%.

Technical Review

Qualcomm shares are slipping ahead of the 2Q 2013 earnings release, with the 20-Day SMA slipping below the 50-Day SMA, while the Relative Strength Index (RSI) is hovering just above the 30-level, evidence that recent momentum is waning. Should earnings disappoint, look for downside risk to the 200-Day SMA near $62.25, followed by the December lows near $60.00. Should earnings surprise to the upside, look for resistance at $65.00, with room to run toward the $67.00/$68.00 area. (Chart courtesy of StockCharts.com)

Summary

Qualcomm shares are slipping ahead of 2Q 2013 earnings amid concerns over the outlook for smartphones and competition. But with solid fundamentals, a strong market position, exposure to emerging economies, and a favorable valuation backdrop any weakness may be priced in. Watch for earnings on Tuesday from Apple and Broadcom for clues.

DISCLAIMER: By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Source: Qualcomm Slips Ahead Of Earnings Amid Concerns Over Competition And Softer Demand