Qualcomm Inc: QCOM Stock Looks Strong Ahead Of Q4 Earnings

  • Despite a bad start to the year Qualcomm has shown revenue growth in Q3.
  • Will Q4 continue the growth trend set in the last quarter?
  • The acquisition of NXP, confirmed on Oct 27, will play a critical role in Qualcomm's future.

Qualcomm (NSDQ:QCOM), the leading 3G and mobile chipset maker, will be reporting its fourth quarter results on 2 November after the market close. The slowdown in smartphone sales around the world has put a lot of pressure on Qualcomm’s shoulders, leading the company towards bottom line saving measures, a job the company has done admirably in the first nine months of the current fiscal.

Performance And Guidance

Despite seeing its total revenues decline by 12.3% from $19.825 billion in the first nine months last year, to $17.370 during the same period this year, Qualcomm managed to improve its operating income from $4.636 billion to $4.691 billion during the same periods. The operating margin for the first nine months of the current fiscal has gone up to 27.01%, compared to 23.38% during the prior period.

After watching its revenues decline by 19% in the first two quarters, Qualcomm came back with a 4% growth during the third quarter, which helped the stock to keep moving higher instead of declining. Qualcomm is now up 16% since the start of the year and 35% over the last twelve months.

Also Read: This Low Risk Opportunity Could Propel Qualcomm Inc Stock Higher

The company has guided within a wide range, expecting revenues to be between $5.4 billion and $6.2 billion, a range that will result in anywhere between a decline of 1% to a growth of 14% YoY. A quick look at the way the stock has gone up clearly shows that the market is expecting the company to post decent growth numbers. Wall Street is expecting the company to hit $5.84 billion in revenues, and consensus EPS is $1.13.

Qualcomm is expecting operating margin expansion to continue in the fourth quarter as well, and they are expecting a Non-GAAP diluted EPS growth of 15% to 26%. Qualcomm’s Non-GAAP diluted EPS growth for the third quarter was 17%.

Despite the headwinds, Qualcomm has done a great job this year both from a top line as well as bottom line perspective. Their own guidance, as well as Wall Street expectations, indicate that things should sail smoothly during the fourth quarter results as well.

Qualcomm Agrees To Acquire NXP For $38.5 Billion

Qualcomm has been sitting on a pile of cash, and the company had nearly $30 billion in cash and marketable securities at the end of the third quarter. There has been considerable pressure on the company to put this cash to use, and the company was in talks with several semiconductor manufacturers. An announcement was finally made last week regarding the acquisition of NXP Semiconductor (NSDQ:NXPI). NXP Semiconductors has a strong position in the Secure Identification, Automotive and Digital Networking markets.

Also Read: NXP Merger To Drive Long Term Gains For Qualcomm Inc (QCOM) Stock

The deal was officially announced by Qualcomm and NXP Semiconductors on Thursday, last week, and Qualcomm CEO Steve Mollenkopf has said that the deal would expand the company’s footprint into the automotive and Internet of Things segments in a big way. The company confirmed the deal amount at $38.5 billion.

News of the acquisition has already had a positive impact on Qualcomm’s stock price, sending the stock over the $70 mark soon after the news came out. QCOM has been trading in a relatively tight range around that mark since then.

Considering the gains the company has made despite the state of the smartphone market, it looks like the stock is becoming more attractive by the day. Overall, Qualcomm seems to be having a great fiscal despite early problems.

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