Is Qualcomm Resilient?

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With shares of Qualcomm Incorporated (NASDAQ:QCOM) trading at around $63.93, is QCOM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

In the wireless world, Qualcomm is known as the innovator of code division multiple access technology. In the analyst world, Qualcomm is widely known as a great long-term investment. Are analysts correct? No one knows the answer to that question, but an opinion based on current circumstances will be offered in the Conclusion section. There are both positives and negatives for Qualcomm.

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Positives:

  • Leader in high-end smartphone market
  • Smartphone growth in China
  • Chipset vendor for Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), and Samsung
  • Increased demand for smartphones and tablets
  • Management firmly believes in revenue and earnings growth through 2018
  • Consistent revenue improvements on an annual basis
  • Consistent earnings improvements on an annual basis
  • Strong margins
  • Excellent cash flow
  • Targeting Vietnam market
  • 2.10 percent yield
  • Shorts fear betting against the stock
  • Stellar balance sheet

Negatives:

  • Will lose revenue when handset prices drop
  • Global economic uncertainty
  • Increased competition

Positives clearly outweigh negatives. It should also be noted that Qualcomm has a 3.8 of 5.0 rating on Glassdoor.com, which is very high. This indicates a good company culture. Even more impressive is that 87 percent of employees would recommend the company to a friend. There’s one number yet even more impressive than that. An amazing 92 percent of employees approve of CEO Paul E. Jacobs. These types of numbers aren’t often seen in any industry, and it’s a testament to superb leadership. If employees are happy, then they’re much more likely to be productive.

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Now let’s take a look at some comparative numbers. The chart below compares fundamentals for Qualcomm, Intel Corporation (NASDAQ:INTC), and Broadcom Corp. (NASDAQ:BRCM). Qualcomm has a market cap $109.77 billion, Intel has a market cap of $110.30 billion, and Broadcom has a market cap of $18.19 billion.

QCOM

INTC

BRCM

Trailing   P/E

16.87

10.47

25.57

Forward   P/E

13.01

10.88

10.44

Profit   Margin

32.33%

20.63%

9.19%

ROE

18.12%

22.66%

10.01%

Operating   Cash Flow

$6.19 Billion

$18.88 Billion

 $1.93 Billion

Dividend   Yield

2.10%

4.20%

1.30%

Short   Position

0.80%

4.80%

1.30%

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock…

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