Can Qualcomm build on last year’s stock performance in 2014?
Qualcomm’s stock has done well in the past year
As the graph below shows, Qualcomm’s (QCOM) stock value has steadily increased from about $60 to $80 during the past year. According to Strategy Analytics, the overall cellular baseband processor market grew from $17.5 billion in 2012 to $18.9 billion in 2013, at a growth rate of 8%. Qualcomm is the dominant player in this market, with a revenue share of 64%, followed by MediaTek (MDTKF), Intel (INTC), Spreadtrum (SPRD), and Broadcom (BRCM). Qualcomm is so dominant in this market that the second largest player, MediaTek, only has a 12% share in this market.
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Qualcomm posted better-than-expected earnings results, but revenue growth slowed
In the fiscal second quarter ending March 31, Qualcomm posted EPS (earnings per share) of $1.31, which were $0.06 above the high end and $0.11 above the mid point of its prior guidance range. Qualcomm attributed the increase in earnings to lower-than-expected operating expenses from its QCT segment. The QCT segment manufactures CDMA- and OFDMA-based integrated circuits, which are used in wireless devices such as mobile phones, tablets, and laptops. Although EPS were above expectations, Qualcomm’s revenues of $6.4 billion were only up 4% over the same quarter last year and down 4% sequentially. Qualcomm attributed the slowdown in its revenue to the situation in China, where consumers delayed their decision to purchase smartphones due to the expected rollout of LTE technology by China’s telecom players.
Qualcomm’s increase in dividend and new share repurchase program show confidence
Funds like the iShares PHLX Semiconductor ETF (SOXX) and Powershares Dynamic Semiconductors ETF (PSI) have decent exposure to Qualcomm. Recently, Qualcomm announced a 20% increase in dividend as well as a new share repurchase authorization program of $7.8 billion. This shows that Qualcomm believes its share price is undervalued and that the company has confidence in itself.