Qualcomm Stock (NASDAQ:QCOM) Upgraded to Strong Buy from Buy

- July 22, 2016

Qualcomm stock QCOMQualcomm stock (NASDAQ:QCOM) was upgraded to Strong Buy from Buy after its earnings showcased a beat on both the top and bottom line with a return to growth. The strong results and outlook caused a whopping 10 point gain in the BNL Finance numeric rating system, from 80 to 90. This makes Qualcomm stock one of only a handful of securities to reach a score of 90 or above.

Why Qualcomm stock earns a 90 scores

What makes Qualcomm’s fiscal third quarter report great is that it completely changes the narrative that surrounds QCOM stock.

Qualcomm stock previously reflected ongoing legal woes and lawsuits, double digit revenue losses, and margin pressure. These are not things the market likes to see. However, by topping $6 billion in revenue QCOM beat sales expectations  by $450 million and, more importantly, returned to growth.

As a result, investors take notice when Qualcomm talks 5G and internet of things as growth catalysts for the next decade. It’s a complete change in sentiment to go along with an attractive valuation, big dividend, and generous buybacks that should boost Qualcomm stock throughout the back half of 2016.

 

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Business growth — 6

Qualcomm has favorable comps. Therefore, it should continue to grow year-over-year, but it is not all that impressive.

Macro outlook — 9

During the smartphone and tablet growth era, Qualcomm grew faster than any big tech company as its chips were deployed to power and connect these devices. The internet of things and 5G presents the same kind of opportunity.

Profitability — 10

QCOM had a 26.6% operating margin during this last quarter. That’s actually down compared to its last 12 months due to pricing pressure. However, it is also up 13% sequentially as Qualcomm appears to be gaining back some of the pricing power it previously lost.

Catalyst — 10

This quarter represents a complete shift in how investors see QCOM stock. Yes, that makes it a very meaningful catalyst.

Balance sheet — 9

The company has some debt indeed, but with a debt to asset ratio near 25% it is very manageable.

Vision — 9

Valuation — 10

Risks — 10

Qualcomm may have some adversity, but a more connected world is ultimately a good thing for QCOM

Short-term outlook — 9

Given the Qualcomm’s earnings performance, expect more upgrades as analysts revise their outlook. I now think QCOM could earn $5/share next fiscal year. At $75 that’s 15x forward earnings, and even cheaper if you remove cash & equivalents from its valuation. $75 is very possible, 25% upside over the next year.

Long-term outlook — 8

Qualcomm has reduced its share count by 14% since 2014. Those big buybacks will remain a huge part of the Qualcomm stock story. This, combined with improved earnings and a 3.5% yield should push QCOM higher. The big unknown is what multiple is fair and realistic for a tech giant like QCOM. As we have seen, big tech have been top performers this earnings season, and Qualcomm has performed best among this group. As the IoT and 5G become a bigger reality for Qualcomm, expect QCOM stock to consistently outperform the market.

Total score — 90

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  1. By obsessive lenceria catalogo on October 8, 2016 at 6:34 pm

    obsessive lenceria catalogo

    Qualcomm Stock (NASDAQ:QCOM) Upgraded to Strong Buy from Buy

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