Yahoo Finance QCOM Stock Has a Better Future Than You Think
QUALCOMM, Inc. (NASDAQ:QCOM) is as divisive a name as you’ll find in today’s markets. QCOM stock is essentially too big to fail according to annalists on one side of the debate. But on the other hand, shares of the tech giant have been gutted nearly 23% year-to-date. Plenty of unknowns exist, which makes deciphering QCOM all the more difficult.
In my last write-up about Qualcomm stock, I took encouragement from its technical setup.
Within this year, the embattled company’s shares had three distinct opportunities to fall into oblivion. Up until a few days ago, QCOM stock held steady around the $51 range. But even at the time of writing, the tech firm is trading hands above $50.
As I noted at the time, holding support doesn’t tell us everything because QCOM stock can always break down further. But what I thought was significant was that the plethora of bad news failed to decisively kill shares. In my view, the more QCOM treads water, the more likely bearish traders jump ship to avoid serious damage. Even a dead-cat bounce could trigger a margin call.
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But the bullish case for Qualcomm stock doesn’t just rest on technical or psychological catalysts. As InvestorPlace contributor Richard Saintvilus points out, Qualcomm the company is far more impressive than QCOM the investment.
Saintvilus writes, “Not only has Qualcomm beaten Wall Street’s earnings estimates in twelve straight quarters, it has only missed on revenue three times during that span. Good luck finding another large-cap stock in any sector that has put up that type of record.” Good luck indeed! Today’s markets are littered with ambiguous opportunities. Moreover, QCOM stock is one of the few investments that legitimately offer a generous dividend yield.
Nervous Sentiment towards QCOM stock
So why are the markets so dim on Qualcomm stock? First, the aforementioned technical support broke down when Wall Street resumed trading after Labor Day. Writing for InvestorPlace, Johnson Research Group warned that QCOM was skating on thin ice. The analyst firm forecasted that the $52.50 price point was critical, and that dropping below that is a harbinger.
Not helping matters is that QCOM stock is badly under performing rivals like Texas Instruments Incorporated (NASDAQ:TXN), HP Inc (NYSE:HPQ), and technically, even Dow Jones-laggard International Business Machines Corp. (NYSE:IBM). To add insult to injury, the broader SPDR S&P Semiconductor (ETF) (NYSEARCA:XSD) is up almost 13%.
But even more worrisome is the bitter dispute between QCOM and Apple Inc. (NASDAQ:AAPL). My InvestorPlace colleagues covered this royalties-related conflict extensively. Like Qualcomm stock, some see the litigation as a potential windfall; others see nothing but indefinite headaches and frustrations.
However, Barron’s recently reported on a major accusation that could end up hurting long-term investors. Bernstein analyst Stacy Rasgon stated that QCOM could be misleading shareholders by presenting two different stories: a negative spin for the courtroom and a positive one for Wall Street.
In a nutshell, the Apple litigation may be responsible for a snowball effect. Apple fired the first shot against Qualcomm stock through its refusal to pay what they perceive as onerous royalties. Other companies could be following suit, the most notable suspect being Chinese telecommunications-equipment provider Huawei. If true, the royalty conflict sparked a contagion effect that could cripple QCOM’s intellectual-property business.
Finally, what few people saw coming earlier this year was the rapidly degrading situation in the Korean Peninsula. According to our own Chris Tyler, Qualcomm “currently generates 17% of its revenues, totaling more than $4 billion,” from South Korea. Even an economic disruption could be catastrophic news for QCOM stock.
QCOM will hurt, but it Can Recover
I believe the nearer-term situation for the tech firm is ugly, and I’m mainly saying that because of North Korea. Normalcy bias tells us that dictator Kim Jong-un is more likely to order a decent haircut than World War III. Still, nobody has tested American resolve and patience quite like the hermit nation. In short, we’re in a modern day Cuban missile crisis.
Assuming though that tensions somehow calm down, I’m willing to trust QCOM stock. Management has been making smart decisions that diversifies itself away from just IP-related revenues. As my colleague Chris Lau notes, Qualcomm is hard at work developing 3D sensors for smartphone cameras. Additionally, the company continues to make strong inroads towards next-generation 5G wireless integration.
And the litigation that the firm has with Apple isn’t a done deal for either party. If the 2016 election taught us anything, it’s that we should never overestimate our abilities to predict our neighbors’ behaviors.
What we do know are facts, and they tell us that QCOM is a reliable fiscal performer. Moreover, management decided years ago to forge the path for tomorrow’s technological landscape. With the right execution and a generous helping of luck, Qualcomm stock could get back to winning.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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