On Feb 19, we issued an updated research report on
). The long-term fundamentals of the company remain fascinating
given the steadily growing demand for 4G Long Term Evolution
(LTE)-enabled mobile handsets in developed countries, rapid
transition from 2G to 3G/4G in China and other emerging markets
and increasing licensing revenues. However, decreasing growth
rate of the high-end smartphones, intensifying competition in the
low-end smartphone chipset segment and litigation issues in China
are the near-term concerns.
Qualcomm has reported positive earnings surprises in three of
the last four quarters, with an average surprise of negative
0.46%. The company reported mixed financial results for the first
quarter of fiscal 2014. Earnings beat the Zacks Consensus
Estimate but revenues lagged the same.
Qualcomm benefits from the significant growth of 3G wireless
technologies and smartphones in the emerging markets,
particularly in China. The next-generation super-fast 4G LTE
technology has also boosted Qualcomm's performance.
Moreover, the acquisition of Atheros Communications has
transformed Qualcomm into an integrated chipset developer for the
mobile computing market. In Jan 2014, the company acquired a
portfolio of patents from
). The portfolio comprises 1,400 granted and pending patent
applications from the U.S. and about 1,000 granted and pending
patent applications from other countries including China,
England, Germany, Japan and South Korea.
The primary concern for the company is aggressive competition
in the mobile phone chipset market, which may hurt the company's
profit in the future. Qualcomm is facing severe competitive
threat from its closest rival,
), which has been redesigning its chipsets for the mobile
computing market. The ongoing global economic volatility may
severely impact the telecommunications industry, which in turn
may negatively affect the demand for Qualcomm developed
Qualcomm currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Another stock that is worth considering within this sector is
) carrying a Zacks Rank #1 (Strong Buy).
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