Qualcomm's [QCOM] share price is getting good reception right now. The stock is up 40% so far this year and it’s still gaining, climbing 13% in the past three months. Qualcomm specialises in chips for smartphones and sales could be turbocharged with both Apple [AAPL] and Huawei using its 5G-technology. With the 5G smartphone cycle only just taking off, are there still gains in Qualcomm’s share price, or is it time for investors to hang up on the stock?
When is Qualcomm reporting Q3 earnings?
What happened last quarter?
Last quarter, Qualcomm saw non-GAAP revenue come in at $4.89bn — effectively flat from the same period last year. Non-GAAP diluted earnings per share came in at $0.86, up 8% from the $0.80 seen in the previous year.
5G continued to be the focus for Qualcomm, with management highlighting the chipmaker's position of strength in the area. In a statement, Qualcomm highlighted a new patent license agreement with Huawei, the biggest operator currently using 5G-technology. Qualcomm is in talks with the US Commerce Department over the deal. A positive update could boost Qualcomm’s share price post-earnings.
“As 5G continues to roll out, we are realizing the benefits of the investments we have made in building the most extensive licensing program in mobile and are turning the technical challenges of 5G into leadership opportunities and commercial wins,” said Steven Mollenkopf, Qualcomm CEO.
"As 5G continues to roll out, we are realizing the benefits of the investments we have made in building the most extensive licensing program in mobile and are turning the technical challenges of 5G into leadership opportunities and commercial wins,” - Steven Mollenkopf, Qualcomm CEO
Why should investors care about Qualcomm’s share price?
5G options play ahead of earnings
Last week, Apple launched its latest 5G-enabled iPhones, supported by Qualcomm technology. Apple is an obvious choice for traders looking to get in on the upcoming 5G trend, but Qualcomm could also be a likely play.
At least that’s the view of TradingAnalysis.com founder Todd Gordon, speaking to CNBC’s ‘Trading Nation’ last week. Gordon suggests one way to trade Qualcomm’s share price ahead of the earnings is through the options market, telling CNBC that he has bought $126 calls and sold $130 calls on Qualcomm November 6 options.
“It’s going to be an earnings trade, so it’s going to be really hard to manage risk if the earnings don’t go well because it’s after hours and the options markets are closed, so position-size such that that full risk is acceptable to you,” Gordon said.
Gordon is bullish on tech stocks, and Qualcomm in particular, telling CNBC that he’d “likely be adding Qualcomm” to his portfolio. He also notes the relative strength of Qualcomm’s share price compared to Apple’s, saying that in recent market declines the chipmaker’s stock had remained strong, while Apple’s share price had fallen in line with the broader market.
What is Wall Street expecting from Qualcomm’s share price?
Expectations are for Qualcomm to post earnings of $1.17 a share, up from the $0.78 seen in the same period last year. Revenue is expected to come in at $5.94bn, up 23.60% from the $4.8bn seen last year. Qualcomm is forecasting non-GAAP revenues of between $5.5bn and $6.3bn, with non-GAAP earnings per share of between $1.05 and $1.25.
Qualcomm's forecast Q3 revenue
For the full year, Wall Street is expecting $3.93 earnings per share on revenue of $21.1bn. Yet, despite Qualcomm’s share price gains, there could still be more gains left for long-term investors. In 2021, Qualcomm’s earnings could grow 43% driven by its 5G earnings. At least that’s the view of Citi analyst Christopher Danely, who increased his price target on Qualcomm from $108 to $132.
Forecasts on Yahoo Finance back Danely’s optimism for Qualcomm’s share price. For 2021, Wall Street is predicting earnings of $6.49 a share, almost double those anticipated for 2020. Revenue is expected to come in at $27.95bn, up 32.40% from the previous year. Bank of America is even more bullish on Qualcomm, recently raising their price target from $145 to $165.
Among the analysts tracking the stock on Yahoo Finance, Qualcomm’s share price has an average $131.90 target. Hitting this would represent a 6.92% upside on the current price (through 30 October’s close).
|PE ratio (TTM)||52.64|
|Quarterly revenue growth (YoY)||-49.20%|
Qualcomm's share price vitals, Yahoo Finance, 03 November 2020