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Qualcomm, Inc. (QCOM) Stock: Is the Worst Over?

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All's fair in love and war .. and apparently business, at least until you get caught and sued, that it. That's the situation leading wireless communications chipmaker Qualcomm, Inc. (NASDAQ: QCOM ) finds itself in right now. The company is being sued by both the Federal Trade Commission (FTC) and Apple Inc. (NASDAQ: AAPL ) for alleged unfair licensing practices and monopolistic behavior . QCOM stock has taken a serious hit in the wake of these lawsuits, leaving many to wonder if the worst has already been factored in.

Go Long This Qualcomm, Inc. Pop for Free (QCOM)

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Today, we have a pair of trade ideas for those eyeing the bullish side of QCOM.

The aforementioned lawsuits, combined with additional selling pressure due to a poor showing with first-quarter earnings , has Qualcomm stock trading down more than 18% so far in 2017. But the shares showed some signs of bouncing back on Friday, with QCOM bouncing off support near $52 and reclaiming its 10-day moving average in the process.

Bargain hunting is the most likely culprit, as QCOM stock traded in oversold territory for roughly a week heading into Friday's session. If the market has decided the worst is now factored into shares, the stock could have plenty of short-term upside.

Take Qualcomm's sentiment backdrop, for example. Despite the lawsuits and poor earnings showing, the stock has yet to see a single "sell" rating from the brokerage bunch. According to Thomson/First Call, there are 14 "holds" and 16 "buy" ratings levied at QCOM stock, and the 12-month consensus price target is holding at $65.53 - a full 21% north of the shares' current perch.

What's more, short sellers are abandoning QCOM in droves. During the most recent reporting period, the number of shares sold short plunged 9% to 12.4 million, representing less than 1% of the stock's total float. With short sellers jumping ship, it's a good bet that worst is already priced in - and Qualcomm could be headed higher once more.

Click to Enlarge QCOM options traders, meanwhile, have taken up a bearish stance. Currently, the March put/call open interest ratio rests at 1.08, with puts and calls in near-parity. That said, the biggest spike in OI in the March series has been at the $50 strike, and appears to be almost entirely made up of sell-to-open activity, indicating bullish-to-neutral put sell action.

Checking in with March implieds, options are pricing in a potential move of about 6% for QCOM in the coming month. This places the upper bound at $57.20, while the lower bound rests near $50.80.

In short, the March $50 strike appears to be an excellent place for put selling activity, while a rally to $57.20 would leave the shares well short of overhead resistance near $60.

2 Trades for QCOM Stock

Call Spread: For those looking to bet on a short-term comeback for QCOM stock, a March $55/$57.50 bull call spread has some impressive profit potential. At last check, this spread was offered at 57 cents, or $57 per pair of contracts.

Breakeven lies at $55.57, while a maximum profit of $1.93, or $193 per pair of contracts, is possible if QCOM stock trades at or above $57.50 when March options expire next month.

Put Sell: If you're more inclined to follow the bullish-to-neutral crowd when it comes to QCOM, then the March $50 put sell should finish out of the money. At last check, this put was bid at 38 cents, or $38 per contract.

Remember that you keep the initial premium received as long as QCOM stock closes above $50 when March options expire. However, if QCOM trades below $50 ahead of expiration, you could be assigned 100 shares for every put sold at a cost of $50 per share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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The post Qualcomm, Inc. (QCOM) Stock: Is the Worst Over? appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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