QUALCOMM, Inc. (NASDAQ:QCOM) stock closed below $52 for the first time in the last 1 year. Should you buy now?
2017 has been a year to forget for Qualcomm,Inc. (NASDAQ:QCOM) shareholders with the stock down more than 20% in the Year-to-date. In the same timeframe, the Nasdaq Composite (INDEX:COMPX) has gained more than 15%, such has been the underperformance of QCOM stock. Even an earnings beat in its third quarter earnings last month did little to change the fortunes of Qualcomm shares. The company's legal troubles have weighed heavy on any positive development for the company. On Friday (August 18), QCOM stock saw another low when it closed at a 52 week low. Qualcomm stock had breached a major support level at the $52, which acted as a strong support level in 2017. Now, the question is, whether QCOM stock is in for more pain or is it a value buy at its 1-year low?
More Trouble ahead for Qualcomm?
One of the biggest positives of Qualcomm which is still boosting the morale of the frustrated shareholders is the company's NXP Semiconductor (NASDAQ:NXPI) deal. However, the last SEC filing in July suggests Qualcomm's NXP acquisition might be at-risk. The percentage of tendered NXP shares fell to 7.6% from 12.5% in June. Qualcomm had launched a tender offer for NXP semiconductor shares at $110 per share, and the company needs a minimum 80% of outstanding NXPI shares to be tendered to complete the acquisition. But, the present NXPI stock price has crossed the $110 mark and the stock had a last close of $112.45. Things are getting much more complex after Hedge fund Elliott Management has taken a 6% stake in NXP. The tendering of requisite shares of NXP for Qualcomm now looks a daunting task as Elliott is bootlegging for a much higher price or sale to another buyer buoyed by the fact that current share price is more than the tendered price. Even a marginal increase in sale price would cost the smartphone chip giant a few billion dollars more whose licensing revenues are already under stress.
The San Diego based chipmaker does need the acquisition badly to diversify into growing Automotive and IoT markets. A setback here could spell big trouble for the stock. If this was not enough, the risks to Qualcomm business seems to be just increasing. Due to the ongoing tension between, North Korea and US, the firms doing business in South Korea could be impacted being an ally of US and sharing the border with North Korea. A Bloomberg post reports of increased military activity along the Asian nation's border. The report finds Qualcomm as one of the firms to be hit the most if there's a disruption in commerce in South Korea on account of military tensions. It is reported that smartphone chipmaker derives nearly 17% of its global revenues from South Korea. This is a significant number and any disruption could be fatal to QCOM stock's fortunes.
Technicals stacked against QCOM stock.
QCOM stock's recent struggles have seen it lose crucial support levels from its Simple Moving Averages(SMAs). Qualcomm shares are presently trading below all its crucial SMAs, be it the 20-day, 50-day, 100-day SMA or the long-term 200-day SMA. Further, the stock is poised for a bearish Moving Average Convergence Divergence (MACD) crossover. The MACD line is just a few values away from falling below the signal line suggesting a bearish trend. Further, the stock is not in oversold territory as per both popular momentum indicators Bollinger Bands and Relative Strength Index for the downtrend in QCOM shares to subside. The RSI measure of the Qualcomm stock is still comfortably above the generally used oversold threshold measure of 30 at 39.22. However, the Bollinger Bands indicator suggests an oversold condition as the share price has breached the lower Bollinger band in the last trading session. And, generally, the combination of the above two indicators is considered as a strong signal. So further weakness in Qualcomm shares could be expected on account of a bearish MACD crossover.
Playing QCOM stock.
Qualcomm shares trade at very cheap valuations, with a trailing P/E of 17.30 and forward P/E of 15.36. Qualcomm is still a cheap stock with a high dividend, one of the highest yields among large-cap tech. However, the risks surrounding NXP acquisition could be fatal to the stock's prospects if any further bad news comes out. The NXP deal is a crucial cog in the company's growth engine. With technicals not favoring QCOM stock, investors should watch the charts closely before making a move. QCOM stock at this levels could be an attractive buy but the risks persist.
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