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Analyst Blog

Zacks Investment Research upgraded the world’s largest mobile chipset developer, Qualcomm Inc. (QCOM - Analyst Report), by a notch to a Zacks Rank #2 (Buy) on June 24, 2014.

Why the Upgrade?

The long-term fundamentals of Qualcomm remain intriguing given the steadily growing demand for 4G LTE-enabled mobile handsets in developed countries, rapid transition from 2G to 3G/4G in China, and other emerging markets and increasing licensing revenues.

We believe Qualcomm is expected to gain considerably from China over the near term. This forecast is based on the company’s decision to launch its first smartphone chipset, specifically designed for China, in the second half of 2014. Recently, Qualcomm added another feather to its cap. The company provided the chipset and modem for the first commercially available LTE-A (Long-Term Evolution Advanced) Category 6 (Cat 6) smartphone.

Qualcomm’s strong operating performance is also evident in the successive past two quarters reflecting earnings beats. In the first and second quarters of fiscal 2014, earnings surpassed the Zacks Consensus Estimate by 2.7% and 10.1%, respectively.  

In the last concluded second quarter, the company posted quarterly earnings of $1.20 per share that breezed past the Zacks Consensus Estimate of $1.09, and rose 14.3% year over year. Total revenue of $6,367 million was up 4% year over year.  

The Zacks Consensus Estimate for the current year, which stands at $4.64, has increased 0.2% and 0.7% over the past 60 and 90 days, respectively.

Other Stocks to Consider

Other stocks worth considering in this sector include Comtech Telecommunications Corp. (CMTL - Snapshot Report), InterDigital, Inc. (IDCC - Snapshot Report) and Ubiquiti Networks, Inc. (UBNT - Analyst Report). Comtech Telecommunications and InterDigital sport a Zacks Rank #1 (Strong Buy), whereas Ubiquiti Networks carries a Zacks Rank #2 (Buy).   

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