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Qualcomm (QCOM)
Qualcomm Cautiously Increases 3Q Guidance
The technology sector has been the area of concentration in recent weeks; just yesterday, tech stocks helped drive the markets down. The sector seems to volley back and forth, with some companies managing to do well even in this economy, while others struggle with plummeting sales. And for companies like Qualcomm, which manufactures parts for equipment including cell phones and computers , their fate so often is closely tied to the performance of the companies which are using their products. So as Qualcomm made an announcement regarding its earnings forecast, it was hard to predict what would be said, since the tech sector has been so unpredictable.
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Looking at the numbers, things look pretty good for Qualcomm. The company increased their third quarter guidance, saying that they expect revenue between $2.67-2.77 billion, up from a previous estimate of $2.4-2.6 billion. Estimated operating income rose as well, from $880-900 million to $1.06-1.11 billion. The company is also expecting to ship an increased number of items containing their CDMA technology.
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Furthermore, while some companies have not been able to maintain strong sales, Qualcomm has seen demand increase for its third generation (3G) products, despite concerns regarding overall cell phone sales. Additionally, the company is now pushing smartbooks, which are somewhat of a cross between a smartphone and a laptop, with somewhat less functionality and significantly smaller size than a laptop. Qualcomm is hoping to create devices that could compete with products developed by Intel (INTC: Charts, News, Offers) and Microsoft (MSFT: Charts, News, Offers).
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However, something has caused investors to be wary of this seemingly good news, and in early morning trading actually caused Qualcomm stock to be trading lower shortly after the announcement. Part of this concern may be related to the fact that although shipments are going up, the company also reported that average selling price is going down. The average selling price for these items a year ago was $226 per unit, and had been estimated at $196 for this quarter, but was just revised down to $191. Additionally, the CEO issued this statement: "While [...] demand remains generally strong, due to the current economic environment we remain cautious and currently project a modest sequential decrease in chipset shipments."
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Looking closely, Qualcomm's announcement is pretty similar to the overall tendency of the tech sector; a little bit of good news, mixed with a little bit of bad news. The company's stock started off with a decline, but has since risen and is actually showing some gains, and it wouldn't be surprising to see this trend reverse itself a couple more times before the week is out. So far, the company's cautiousness has seemed to mostly overshadow the increased revenue projections. The investors will have to keep a careful eye on the company, and see if the company can manufacture some more promising news by the end of the quarter.
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Click here to view a detailed profile of Qualcomm.
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