Qualcomm: Still On The Path

Feb. 13, 2019 11:47 AM ETQUALCOMM Incorporated (QCOM)AAPL, AVGO, NXPI39 Comments


  • Qualcomm remains on a path to a $7 EPS despite smartphone market weakness.
  • The company still has substantial share repurchases to complete.
  • The license royalty deals with Apple and Huawei remain the biggest risk to the EPS targets.
  • The stock is a bargain at $52 with a 4.8% dividend yield.

As FY19 progresses, Qualcomm (NASDAQ:QCOM) remains officially far off from its targeted EPS of $7. General smartphone market weakness has hidden the progress the wireless semiconductor company has made in support of my bullish investment thesis. A shift to 5G in 2019 should reverse the negative trend in a positive way for the stock. The company remains on a path to the $7 EPS target.

Image Source: Qualcomm website

Smartphone Weakness

Qualcomm trades just above $50 due revenue weakness and March quarter guidance for only earning $0.70 when the company was predicting an annualized rate of $7 per share. The loss of the Apple (AAPL) modem business and general smartphone market weakness isn't helping short-term results.

A lot of the end of 2018 smartphone weakness appears centered around the trade wars and possibly some replacement cycle lengthening due to 5G devices on the horizon. According to IDC estimates, the smartphone market fell 4.9% YoY in Q4.

So Qualcomm missing revenue targets wasn't exactly a company issue. The company sells less chips and collects fewer royalties when device shipments are weak.

According to CFO George Davies on the earnings call, Qualcomm had to lower expectations for FY19 based on the weakness generally felt from emerging markets and China:

Relative to our previous expectations, which had excluded any revenue from the interim agreement licensing revenues were lower by a $150 million to $200 million in the quarter. Given the headwinds facing the market broadly, we have reduced our global 3G, 4G device forecasts for the calendar year '18 to the low-end of our previous guidance range consistent with lower royalty units in the December quarter. Emerging regions and China were responsible for the largest shortfall in units relative to expectations although the lower levels of demand appear to be fairly widespread.


This article was written by

Stone Fox Capital profile picture
Out Fox the market with misunderstood, high reward opportunities
Stone Fox Capital Advisors, LLC is a registered investment advisor founded in 2010. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA.

Stone Fox Capital launched the Out Fox The Street MarketPlace service in August 2020.

Invest with Stone Fox Capital's model Net Payout Yields portfolio on Interactive Advisors as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here:

Net Payout Yields model

Follow Mark on twitter: @stonefoxcapital

Disclosure: I am/we are long QCOM, AAPL, NXPI. 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.

Recommended For You

Comments (39)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.