Qualcomm Inc (QCOM)

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Qualcomm Shares Up 56% YTD: What's Driving the Performance? Fahita

By: Zacks Equity Research | December 26, 2019

Shares of San Diego, CA-based Qualcomm Incorporated (QCOM - Free Report) have risen 56% so far this year. The digital communication products maker has significantly outperformed its industry’s growth of 23.5% over the same time frame.



The Zacks Rank #1 (Strong Buy) stock, with a market cap of nearly $101.4 billion, has impressed investors with its recent earnings streak. It topped estimates in each of the trailing four quarters, the surprise being 8.7%, on average. It has a long-term earnings growth expectation of 14%.

We believe that the company has several growth drivers in place and enjoys a robust foothold in its served markets. These should help it maintain momentum in the quarters ahead.

Growth Drivers

Qualcomm is considered to be one of the largest manufacturers of wireless chipset built on baseband technology. It has been working to retain its leadership in 5G, chipset market and mobile connectivity with several technological feats and state-of-the-art product launches. It redefined the computing and mobile ecosystem around the world with the launch of QCA6390 Connectivity system-on-a-chip product.

In September, Qualcomm completed the acquisition of the remaining interest in RF360 Holdings Singapore Pte. Ltd. — a joint venture with TDK Corporation. The buyout allowed Qualcomm Technologies, Inc. (Qualcomm’s wholly-owned subsidiary) to provide customers with Snapdragon 5G Modem-RF System, including 5G NR sub-6 and mmWave solutions, multiplexers, and antenna tuning.

Qualcomm Technologies has one of the broadest portfolios of RF front-end (RFFE) products, comprising integrated and discrete micro-acoustic components utilizing RFFE filter technologies. Moreover, Qualcomm’s second generation RFFE solutions enable OEM customers to design thin, high-performance, battery-efficient 5G multimode devices at scale. The company is likely to benefit from the strong adoption of its Snapdragon 5G Modem-RF Systems in 5G design wins.

In April, Qualcomm reached a surprise settlement with Apple (AAPL) that cleared the road for iPhones to once again use its modem chips. The companies also inked a six-year licensing agreement that includes a two-year option to extend and a multiyear chipset supply deal.

Qualcomm continues to execute its strategic objectives, which include driving the global transition to 5G, protecting the value of its technology, and expanding into new industries and product categories for future growth. However, it faces aggressive competition from low-cost rival chipmakers like MediaTek.

Trend in Estimate Revisions

The Zacks Consensus Estimate for Qualcomm’s current-year earnings has been revised 4.3% upward over the past 60 days from $3.95 to $4.12. Also, over the same time frame, the consensus estimate for its next-year earnings has been revised 2.7% upward to $6.12.

Upbeat Fiscal Q4 Performance

Qualcomm delivered promising fourth-quarter fiscal 2019 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate.

On a GAAP basis, net income was $506 million or 42 cents per share against net loss of $513 million or loss of 36 cents per share in the prior-year quarter. Non-GAAP net income came in at $947 million or 78 cents per share compared with $1,260 million or 89 cents per share in the year-ago quarter. The figure exceeded the top end of management’s guidance, backed by higher Qualcomm Technology Licensing (QTL) revenues. The bottom line beat the Zacks Consensus Estimate by 7 cents.

Aggregate revenues were $4,814 million compared with $5,778 million in the prior-year quarter. The top line surpassed the consensus estimate of $4,718 million and was above the midpoint of the guided range owing to solid QTL revenues on higher unit sale and strong product mix.

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