Last week was disastrous for the major semiconductor stock, Qualcomm Inc. ( QCOM ). The company's stock hit the lowest point in more than four years on November 5 and became one of the worst performers in the S&P 500. The blame goes to the company's disappointing fiscal fourth quarter (ended September 27, 2015) results and lower-than-expected top-line and bottom-line guidance for the current quarter of its fiscal 2016.
The San Diego, CA based company's mobile chip business has already been hit hard by Samsung Electronics' ( SSNLF ) and Apple's ( AAPL ) decision to use their own in-house processors. The company now faces headwinds in its licensing business - the second-largest contributor to its revenues after mobile chips - as it struggles to involve Chinese customers to pay for licensing patents following the antitrust ruling in China. Let's delve a little deeper into the company's earnings (read: Time for Semiconductor ETFs? ).
Qualcomm Earnings in Detail
Qualcomm's adjusted earnings per share for the fiscal fourth quarter came in at 79 cents, significantly down by 30.7% from $1.14 in the year-ago quarter. However, earnings per share surpassed the Zacks Consensus Estimate of 71 cents.
Total revenue of $5,456 million went down 18.5% year over year but outpaced the Zacks Consensus Estimate of $5,210 million. The company's equipment services revenues plunged nearly 25% to $3,619 million while licensing revenues sagged 1.8% to $1,837 million during the quarter. The company shipped approximately 203 million CDMA-based MSM chipsets in the quarter, down 14% year over year.
For the first quarter of fiscal 2016, Qualcomm expects revenues in the range of $5.2-$6.0 billion while non-GAAP earnings per share are projected between 80 cents and 90 cents. Both were lower than the analysts' expectations at the time of earnings release. Shares of the company nosedived about 12.1% since the earnings release (as of November 9, 2015).
ETFs in Focus
The notorious slump in Qualcomm stock is expected to impact the ETFs having significant exposure to the company. However, strong earnings reports from some of the other well-known semiconductor players may offset this impact to some extent. As a result, investors should closely monitor the movement of the below-mentioned ETFs in the coming days ahead (read: Semiconductor ETFs Surge on Impressive Q3 Earnings ).
Market Vectors Semiconductor ETF ( SMH )
This ETF tracks the Market Vectors US Listed Semiconductor 25 Index, measuring the performance of 25 of the largest U.S. based semiconductor equities. Qualcomm takes the third position in the fund with a 10.55% allocation. The fund has garnered nearly $275 million in assets and trades in a solid volume of 3.9 million shares per day. The product charges 35 bps in fees and declined around 0.8% in the past five days (as of November 9, 2015). It carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (see all Technology ETFs here).
iShares North American Tech-Multimedia Networking ETF ( IGN )
IGN follows the S&P North American Technology-Multimedia Networking Index, measuring the performance of 24 multimedia networking stocks in the U.S. Qualcomm occupies the fourth position in the fund with an allocation of 7.99%. The fund manages an asset base of around $140 million and trades in a paltry volume of roughly 20,000 shares per day. It charges 47 bps in investor fees per year and lost around 3% in the last five days. It currently has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
PHLX SOX Semiconductor Sector Index Fund ( SOXX )
This fund tracks the HLX Semiconductor Sector Index, measuring the performance of 30 companies involved in the design, distribution, manufacture, and sale of semiconductors. Qualcomm occupies the fourth position in the fund with a 6.84% allocation. The fund has amassed nearly $380 million in its asset base and trades in a moderate volume of 600,000 shares per day. It charges 47 bps in annual fees and fell less than 1% in the past five days. It carries a Zacks ETF Rank #3 with a High risk outlook (read: A Beginner's Guide to Semiconductor ETFs ).