On Feb 6, we upgraded our recommendation on Qualcomm Inc. (QCOM) to Outperform based on the company’s fourth quarter of 2012 financial results, which significantly outpaced the Zacks Consensus Estimates.
Why the Upgrade
Qualcomm has firmly established its leadership position in the high-end smartphone segment. The company is the major beneficiary to the significant growth of 3G wireless technologies and smartphones in the emerging markets, particularly in China.
The next-generation super-fast 4G Long Term Evolution (:LTE) technology has also boosted Qualcomm. We believe the long-term fundamentals of the company are very much intriguing given the increasing demand for LTE-enabled mobile handsets in the U.S., Japan, and South Korea. Qualcomm currently has a Zacks Rank #2 (Buy).
Qualcomm currently has more than 225 royalty bearing licensees throughout the world. Additionally, the company has over 40 single-mode OFDMA licensees. The demand for dual-core MSM8960/Krait tripled sequentially in the reported quarter. At present, more than 450 Snapdragon-based devices are in the pipeline and over 100 devices are based on the company’s Reference Design solutions.
Qualcomm has announced its next-generation processors called Snapdragon 600 and 800. These chipsets will provide 40-75% increased performance over the S4 Pro series and are the first chips operating on TSMC 28nm technology. Snapdragon 600 will have Quad Core Krait 300 CPU running up to 1.9 GHz and Adreno 320 GPU. Snapdragon 800 will include Quad Core Krait 400 CPU running up to 2.3 GHz and Adreno 330 GPU. These LTE-enabled chipsets will also have integrated 802.11 ac Wi-Fi connections.
Management raised its previous outlook for fiscal 2013 primarily due to growing adoption of 4G LTE networks in North America, rapid transition from 2G to 3G in China and India, and increasing licensing revenue. The company is quite confident that it will be able to retain its current pace of revenue and earnings growth for at least the next five years.
Other Stocks to Consider
Other stocks to consider in the semiconductor industry are Intel Corp. (INTC), Texas Instruments Inc. (TXN) and Broadcom Corp. (BRCM). All these three companies handily beat the Zacks Consensus Estimates in most recent quarter and these three stocks currently have a Zacks Rank #3 (Hold).
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