It looks as if Qualcomm (QCOM) is ready to replace Intel (INTC) as the favorite stock of investors. This can be seen from the market value of Qualcomm going higher than Intel during intraday trading on Thursday. While the interest for Qualcomm shares increased after the company delivered better-than-expected Q4 results and provided an upbeat forecast for fiscal 2013 driven by the smartphone craze, Intel shares are languishing close to a yearly low as the PC is losing its shine.
On Wednesday, after the market closed, Qualcomm announced that it earned a profit of $1.27 billion, or EPS of 73 cents, in Q4, up from $1.06 billion, or EPS of 62 cents. On an adjusted basis, profit for Q4 was $1.55 billion, or EPS of 89 cents. Total revenues increased 18% to $4.87 billion from $4.12 billion in the last year. Both EPS and revenues were above Street expectations of 82 cents and $4.67 billion, respectively.
Looking ahead, the company expects adjusted EPS of $1.08 to $1.16 and revenues of $5.6 billion to $6.1 billion for Q1. The outlook is higher than analysts' initial estimation of EPS of $1.00 and revenues of $5.29 billion. Currently, analysts estimate EPS of $1.11 and revenues of $5.81 billion to reflect the company's outlook. Similarly, for fiscal 2013 Qualcomm guided adjusted EPS to be $4.14 to $4.32 and revenues to be $23.0 to $24.0 billion, while Street analysts initially predicted the company to earn EPS of $4.13 and revenues of $21.69 billion. Now analysts are expecting the company to deliver EPS of $4.43 and revenues of $23.23 billion.
The market value of Qualcomm reached $106 billion on Thursday when the stock reached $62.24 on Nov. 8. This was higher than the market value of $105 billion during the same time period for Intel.
Percentage of Growth or Degrowth
*YTD% is based on closing prices as of Nov. 8.
The above table indicates the gain Qualcomm made year to date, whereas Intel suffered. Qualcomm's EPS also topped analyst estimations in three of the last four quarters.
Looking at the prospects for Qualcomm and Intel, the smartphone craze has not waned, while the demand for PCs is dipping. IDC expects smartphone sales to grow at a compound annual growth rate, or CAGR, of 18.6% until 2016. Qualcomm's Q4 results benefited from robust smartphone sales. While releasing Q4 results, the company's chairman and CEO Paul Jacobs said, "As we continue to invest in and execute on our strategic priorities, our broad licensing program and industry-leading Snapdragon and 3G/LTE chipset roadmap position us for double-digit revenue growth again in fiscal 2013."
On the other hand, Intel faces headwinds from PC shipments. IDC has lowered its CAGR to 7.1% for the years 2013-16 from 8.4% estimated previously for the years 2012-16. For the year 2012, IDC sees PC shipment growth of 0.9% compared to 1.7% growth witnessed in the last year. There is also a belief that if Microsoft's (MSFT) cheaper version of the Surface tablet PC generates more demand, then Intel's rival ARM Holdings (ARMH) will stand to gain as the software company is using ARM processors for its cheaper version of the tablet PC.
It is quite clear why investors prefer Qualcomm over Intel given the performance of the stock. While Qualcomm offers growth opportunities, Intel will struggle for growth. This suggests that Qualcomm is ready to replace Intel as investors' favorite stock. Meanwhile, S&P Capital IQ reiterated its Strong Buy rating on Qualcomm shares and maintained its price target of $82.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.