by Ian Harvey
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Option Trade – QUALCOMM, Inc. (NASDAQ:QCOM) Calls
Wednesday, February 20, 2019
** OPTION TRADE: Buy the QCOM MAY 17 2019 52.500 CALL at approximately $2.40. Place a pre-determined sell at $4.80.
Also include a protective stop loss of $0.95.
Headquartered in San Diego, QUALCOMM, Inc. (NASDAQ:QCOM), U.S.
mobile chipset giant, announced its second-generation
5G modem ON February 19, known as the Snapdragon X55. This modem not only
supports 5G connectivity (and it's improved over what the company offered with
the Snapdragon X50), but it can also work with older networks, too.
Qualcomm says that the Snapdragon X55 can support 5G
download speeds of up to 7 gigabits per second and upload speeds of 3 gigabits
per second. For some perspective, the company indicated that the Snapdragon X50
offers peak theoretical download speeds of 5 gigabits.
Qualcomm says that the baseband processor of the
Snapdragon X55 is manufactured using an undisclosed 7-nanometer manufacturing
The move to 7-nanometer technology should allow for
improved power efficiency and smaller chip area, all else being equal.
Given that the Snapdragon X55 will primarily be
powering smartphones -- devices that are fundamentally space and power
constrained -- the transition to the latest 7-nanometer technology is a good
thing for the product.
QUALCOMM Incorporated designs, develops, manufactures, and markets digital communication products worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on code division multiple access (CDMA), orthogonal frequency division multiple access, and other technologies for use in wireless voice and data communications, networking, application processing, multimedia, and global positioning system products.
QUALCOMM last released its quarterly earnings results on Wednesday, January 30th. The wireless technology company reported $1.20 EPS for the quarter, beating the consensus estimate of $1.09 by $0.11. QUALCOMM had a net margin of 10.03% and a return on equity of 36.66%.
The company had revenue of $4.80 billion for the quarter, compared to analyst estimates of $4.89 billion. During the same quarter last year, the firm posted $0.98 earnings per share. The company’s quarterly revenue was down 21.3% compared to the same quarter last year. Analysts predict that QUALCOMM, Inc. will post 3.23 earnings per share for the current fiscal year.
Wall Street brokerages expect that QUALCOMMwill announce $0.71 earnings per share (EPS) for the current fiscal quarter. Four analysts have issued estimates for QUALCOMM’s earnings. The lowest EPS estimate is $0.69 and the highest is $0.76. QUALCOMM posted earnings per share of $0.80 during the same quarter last year, which suggests a negative year-over-year growth rate of 11.3%.
The firm is expected to issue its next quarterly earnings results on Wednesday, April 24th.
In the second quarter of fiscal 2019, Qualcomm expects its revenue to fall 7.7% YoY (year-over-year) to $4.8 billion at the midpoint, in line with analysts’ estimate of $4.8 billion. The 7.7% fall is better than the double-digit declines the company reported in the second quarters of fiscal 2018 and fiscal 2016. Its slightly better guidance shows that the move to 5G is helping it offset weak smartphone demand.
On its fiscal 2019 first-quarter earnings call, Qualcomm’s CFO, George Davis, stated that the company expects 3G, 4G, and 5G device shipments to increase 5% YoY in 2019, with handset shipments increasing 1% and non-handset shipments increasing 27%.
In the handset market, Davis expects replacement rates to increase as consumers switch to 5G devices and demand picks back up in China. In the non-handset market, he expects demand to be driven by strong growth in the industrial IoT space.
Why the product announcement important….
Though Qualcomm historically hasn't been a top player in the market for RF front-end solutions such as amplifier and antenna modules -- the company has seen some traction in this space lately, landing design wins with the likes of Samsung, Google and Sony. Just as importantly, Qualcomm has argued that 5G gives it an opportunity to take RF share.
Raymond James set a $65.00 price objective on QUALCOMM in a report released on Saturday, February 2nd. The firm currently has a buy rating on the wireless technology company’s stock.
Several equities analysts have recently commented on the company…..
Two analysts have rated the stock with a sell rating, eleven have given a hold rating and twelve have assigned a buy rating to the company’s stock. The company currently has a consensus rating of “Hold” and an average target price of $66.00.
Qualcomm is a leader in 5G technology and is banking on this technology for future growth.
QUALCOMM has a 12 month low of $48.56 and a 12 month high of $76.50. The company has a market capitalization of $62.91 billion, a PE ratio of 16.30, and a PEG ratio of 1.62 and a beta of 1.17. The company has a debt-to-equity ratio of 4.25, a quick ratio of 1.38 and a current ratio of 1.54.