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Will a Licensing Dispute Challenge Qualcomm’s Business Model?

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Part 17
Will a Licensing Dispute Challenge Qualcomm’s Business Model? PART 17 OF 18

A Look at Qualcomm’s Stock Performance

Qualcomm’s stock underperforms the market

So far, we’ve learned that Qualcomm’s (QCOM) regulatory and legal hurdles are overshadowing the growth potential coming to it from adjacent markets, the 5G (fifth-generation) revolution, and its acquisition of NXP Semiconductors (NXPI).

In the past 12 months, Qualcomm stock has risen 6.6%, whereas the S&P 500 Index (SPY) has risen 15.7%. While Qualcomm has underperformed the market, its peers NXP and Broadcom (AVGO) have outperformed the market, rising 26.1% and 65.4%, respectively.

A Look at Qualcomm’s Stock Performance

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Even the strong performance of its chipset business is unlikely to bring significant growth in Qualcomm’s stock price unless the issues surrounding its licensing business are resolved. More than 80% of the company’s profits come from licensing, and investors are more interested in profits than in sales.

Qualcomm’s volatility

Looking at Qualcomm’s stock price movements over the last 12 months, it’s clear that the stock is relatively stable. It has a beta of 0.99, whereas NXPI and Broadcom have betas of 0.18 and 1.46, respectively. Beta is a measure of volatility, with less than 1 being less volatile and more than 1 being more volatile.

Institutional investors

At present, institutional investors own 85.9% of the total outstanding shares of Qualcomm. According to Qualcomm’s SEC (Securities and Exchange Commission) filings, several institutional investors increased or decreased their positions in the company in the two quarters that ended on March 26, 2017.

Massey Quick Simon & Co. acquired $105,000 worth of QCOM shares in 4Q16. Advantage Investment Management acquired $200,000 worth of QCOM shares in 4Q16. American National Bank increased its stake in QCOM by 41% to 2,825 shares worth $162,000 in 1Q17. Jolley Asset Management increased its stake in QCOM by 31.5% to 74,000 shares in 1Q17.

The company’s management recently traded in its shares. Qualcomm’s executive vice president, James Thompson, sold 25,000 shares for $1.3 million on April 21, 2017, bringing his total holdings in the company to $4 million. Director Ann M. Livermore acquired 9,000 shares for $491,000 on May 11, 2017.

Market capitalization

At the end of May 12, 2017, QCOM had a market capitalization of $80.8 billion, 3.5 times its projected fiscal 2017 revenue of $22.7 billion. Qualcomm’s market cap-to-revenue is lower than NXPI’s ratio of 4.12x and AVGO’s ratio of 5.4x. Investors are evidently more optimistic about NXPI and AVGO’s revenue growth potential.

Next, we’ll see what analysts have to say about Qualcomm.

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