Post FQ4 Beat Qualcomm (QCOM) All Set to Dominate Auto-Tech SpaceBy Carrie Williams
The FQ4 results of the popular bluechip tech stock Qualcomm Inc (NASDAQ: QCOM) that were announced this Wednesday beat the street estimates by a huge margin, making the naysayers sit up and take notice. Driven by the upside in the Qualcomm CDMA Technologies (QCT) and Qualcomm Technology Licensing (QTL) segments, QCOM reported sales of $6.2 billion (+2% QoQ) vs the Street estimate of $5.9 billion (-3% QoQ), gross margin of 60.6%, and EPS of $1.28, which was $0.15 higher the Street estimates. However, the FQ1 guidance was below expectation due to modem share loss at Apple and Galaxy Note 7 headwinds.
Post FQ4 beat, Pacific Crest analyst Michael McConnell weighed in on the stock and reaffirmed his Overweight rating and $83.00 price target while adjusting the estimates for QCOM. The $83 PT is an upside of 24.3% from the current price of $66.73. The stock is currently trading above its 50-day SMA of $65.17.
Qualcomm is currently poised to be a major player in the auto tech space thanks to the $39 billion acquisition of NXP Semiconductors (NXPI) that is almost completed. NXPI’s ownership of major automotive processor supplier Freescale Semiconductors as well as the recent debut of NXPI’s semi-autonomous driving technology called Bluebox, in combination with the automotive cellular connectivity technology of Qualcomm, is expected to propel QCOM as a frontrunner in the automotive technology race.
QCOM’s reach, which is limited to just the sale of wireless modems currently, would now be extended to various new automotive tech segments thanks to the 14.5% automotive semiconductor market share already owned by NXPI with specialization in the highly-in-demand segment of chips and sensors manufacturing. An 8% annual growth rate is already expected for the automotive semiconductor market through 2020, further sweetening the deal for QCOM. Furthermore, Qualcomm’s 5G network and NXP’s mobile payment devices (Apple Pay) also makes a great partnership.
Analysts seem to believe that the shares of QCOM would be available for purchase at a great bargain after a good level of sector correction or a post-election crash. With visible growth prospects, purchasing the bargain shares of QCOM would be a no-brainer, not to mention the QCOM’s attractive dividend yield of 3.2%.
According to TipRanks.com, QCOM has a Moderate Buy consensus rating among analysts, with an average price target of $72.80. An upside of 9.10% from the last close price of Qualcomm Inc at $66.73 on Friday.