Update Qualcomm (QCOM)
Now I don’t wish to sound ungrateful for today’s (March 25) pop in the stock, but I do have to ask Was this trip necessary?
Today, Qualcomm (QCOM) raised its outlook for fiscal second-quarter sales and earnings.
The company said it was shipping more chipsets for CDMA cell phones than it had expected.
Expected when?
Why all the way back in January when the company, after reporting its results for the fiscal first quarter (and badly missing Wall Street estimates for the quarter), told Wall Street analysts to expect lower sales and earnings for the fiscal second quarter. That guidance tanked the stock.
In January Qualcomm cut guidance for the second quarter earnings to a range of 49 cents to 53 cents a share. Sales would fall between $2.4 billion and $2.6 billion.
The March 25 guidance calls for earnings of 56 cents to 58 cents a share on revenue of $2.55 billion to $2.65 billion.
In between the January cut to guidance and the March increase to guidance the company announced an increase in its stock dividend and a new stock buy-back program. With many companies I’d say those actions were a sign of confidence in the future. Coming so soon after a cut to guidance had sent the stock into a spin those actions strike me as attempts to support a sinking share price. (For more on that dividend increase and the buy-back program see my post http://jubakpicks.com/2010/03/02/update-qualcomm-qcom-5/ )
The company’s quarter closes on March 31 so you’d think this guidance, delivered just six days before the end of the quarter is probably accurate.
But on past history I can’t be certain.
However, what worries me more than the reliability of the company’s most recent guidance is what Wall Street analysts decide to do in the month between today and the company’s projected April 27 date for officially reporting earnings. Wall Street has a history of getting over enthusiastic about Qualcomm in the run up to earnings and then feeling very disappointed afterwards. I’d worry, maybe enough to sell, if analyst estimates start to rise strongly as we get closer to earnings day.
As of March 25, I’m keeping my target price at $44 by May.
Full disclosure: I own shares of Qualcomm in my personal portfolio.
Related Posts
No related posts.
5 comments
Post a comment
Comments that include profanity, or personal attacks, or antisocial behavior such as "spamming" or "trolling," or other inappropriate comments or material will be removed from the site. We will take steps to block users who violate any of our terms of use. You are fully responsible for the content that you post.
Jim,
as a long time qcom holder I agree. It’s a frustrating company in the way it manages expectations and its business. I’m a great believer in the technological toll road it has built but I’m not impressed with Paul Jacobs’ skills in running a large manufacturing business, let alone a technology company. He’s not done great at the latter; what makes me think he’ll do well at the former?
I desparately wanted to buy more shares in the 30s but got greedy. It never hit my buy limit (twice, no less). I’ll wait now and see what comes.
It’s got too good a position in too key a technology to sell it, but I’d sure like a little less volatility. BUt if it drops back into the mid 30′s again, I won’t make the same mistake twice. Live and learn.
HI Jim, I thought your target was $55 in the original post for qcom. did you revise it sometime?
I am a long term Jubak fan but have mminhaj’s question also – July 15 price was just over $46 at the close with a target of $55 – stock eased up to above $48 this year but has slid back down. how are you handling these re-pricing downward from your buy point in your a’rules of the road”?
Jim lowered the target price in early March when QCOM boosted its share buyback and dividend.
I’m a long time holder of QCOM, been thru 3 splits, sorry I didn’t sell on 1/2/2000 but they keep increasing the companies that are using their chips and getting into new app’s. Where else could I have put that cash and done as well for the past 10 years?? I agree, Paul is not his father but the company keeps growning.