Expect Another Great Report From Qualcomm Wednesday

TheStreet.com

NEW YORK (TheStreet) -- This is a busy week for technology earnings. Apple reports results Tuesday and Qualcomm shares its second-quarter results Wednesday. Investors should anticipate the release shortly after the market closes.

Apple's results have the potential to influence the expected results of Qualcomm. Texas Instruments is a Qualcomm peer that reported Monday. You will want to keep track of industry observations from Texas Instruments for clues of what to expect from Qualcomm.

Conference calls are occasionally insightful for gauging the health of a particular space. Texas Instruments' conference call was expected after the earnings release. Qualcomm investors should expect an impact on Qualcomm shares if any unforeseen related market conditions were revealed.

QCOM Chart
QCOM data by YCharts

52-Week Range: $53.09 to $68.50

Price To Book: 3.1

The analysts consensus profit appraisal is presently $1.16 a share, a gain of 15 cents (12.9%) from $1.01 during the corresponding quarter last year. The lowest analyst estimate this report is $1.12 per share, and the highest is $1.22 per share. If Qualcomm beats this week, the company will have only missed one quarter out of the last 14.


The last time Qualcomm missed was for the third quarter, reported on July 18, 2012. It wasn't much of a miss (only 1 cent) and was "close enough" for Wall Street. Shares jumped higher the next day and have trended mostly higher since.

After Qualcomm's last report on Jan, 30, the shares closed before the release at $63.53 and opened the next day at $67.08, an increase of over 5%. Analysts have lower expectations for this quarter compared to last quarter.

Analyst opinion is mixed with this company. Most of the analysts surveyed don't believe a buy or a sell is currently warranted. The stock appreciated 2% in the last year; however, the average analyst target price is quite bullish at $75.39.

From a technical analysis perspective, the 200-day moving average is within a bullish climbing trend. Unfortunately, the faster-moving averages are relatively placid and after falling below, shares are now trading lower than the 60-day and 90-day moving averages.

Last week, the 200-day moving average was more or less tested. While support held, another test (for example, after earnings) may push the chart dangerously close to a bearish trend. Keep a close eye on the $62 price area.

A disappointing earnings release may cause a price drop below $62 and the chart may shift from bullish to bearish shortly after. On a positive note, I believe Qualcomm will not only meet, but will beat expectations. I expect earnings above $1.18 per share.

Shareholders receive $1.40 annually in dividend payments, placing Qualcomm's yield at a highly respectable 2.2%. Moreover, the payout ratio is less than 30%, placing expected future dividends well into the safety zone I like.


Forget about short-sellers zeroing in on Qualcomm -- almost zero desire with only 0.8% of the float shorted. That's a lower rate than Apple even at Apple's $700 per share peak.

Qualcomm investors appear to be in good shape now, and I expect the same after the company releases earnings. If you're an investor wanting to lower your volatility this week, look to sell the May $70 calls for 20 cents or more if your transaction costs are not cost-prohibitive.

QCOM Revenue Quarterly Chart
QCOM Revenue Quarterly data by YCharts

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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