A Few Reasons Why Qualcomm’s Rally Will Get BetterQCOM) has been my favorite pick this year. I have been bullish on the stock ever since it was trading around $45, and the stock has shot up almost 35% in the reference time period. Despite the strong appreciation, I think Qualcomm still has more upside to offer because it released strong quarterly earnings last month.
Qualcomm shared strong third quarter results, as the company reported EPS of $1.16, $0.19 greater than the estimate. On the other hand, the company’s revenue surged 3.4 percent year over year to $6.03 billion, beating the consensus by $450 million.
Qualcomm faced some problems in the previous year due to the failure of its Snapdragon 810 processor. Due to this reason, Samsung excluded Snapdragon 810 processor from its flagship phones Galaxy S6/S6 Edge. Later, the company solved this issue by developing a new and upgraded processor “Snapdragon 820”. This new processor was much efficient compared to its prior version and was free from overheating issues.
After the launch of Snapdragon 820, Samsung used the processor for some models of its latest flagship Galaxy S7/S7 Edge. Moreover, Snapdragon 820 was also installed in many other smartphones. Samsung has also decided to use Qualcomm’s low-end Snapdragon processors for its less expensive smartphones.
Currently, Qualcomm and Intel account for the two dominant players of the industry. It looks like both the companies have similar valuations and pay dividends to stockholders, but deep inside, their businesses are moving in the different directions.
However, it can be said that Qualcomm is performing better than Intel, as the company has made noteworthy progress in its own turnaround and its future prospects look good as well. Qualcomm’s revenue surged 4 percent in the prior quarter, but revenue escalated 9 percent from the prior quarter.
Moreover, Qualcomm is excellently placing itself to take advantage from the growth of areas of the business, precisely connectivity and 5G. In the case of mobile, the Snapdragon processor is now used by around 150 premium smartphone and tablet designs. Apart from these, Snapdragon processor is also poised to make its way in the virtual reality market, one more promising future growth catalyst.
All in all, there are still many opportunities left for Qualcomm in different segments such as automotive, networking, and Internet of Things, which is why I am still bullish on the stock going forward
Published on Aug 5, 2016By Prudent Investor