Not many reasons to buy Qualcomm right now
The stock is approaching support, however, and at support it appears to be an interesting buy.
By Neal Rau
Qualcomm (QCOM) shares had been bouncing higher off their July lows, but the stock tumbled again after the company's recent earnings report.
Qualcomm has continued with an aggressive stock buyback program but insiders have been selling shares over the past year. Should investors buy, sell or hold at current levels?
The company’s licensing business should benefit from ongoing global 4G LTE rollouts, including China Mobile's (CHL) upcoming 4G launch. Qualcomm’s licensing business brings in double the operating profit of the company's chip business. However, in the future, less expensive phones could hurt Qualcomm's earnings because royalties are based on fixed percentages of selling prices.
Qualcomm announced that its board approved a new $5 billion stock repurchase program, replacing the prior $5 billion stock repurchase program announced in March 2013. At that time the company also announced a 40% increase in its quarterly cash dividend. Since July 24, 2013, Qualcomm has repurchased approximately 40.1 million shares of common stock for $2.7 billion.
Insiders have sold more than 131,000 shares in the last month, bringing the yearly total to 3.2 million shares sold. No insiders have made a buy.
Anand Chandrasekher, the company's former chief marketing officer, was moved to a new position after making critical and negative comments about the Apple (AAPL) 64-bit processor. He said the he considers the new chip a marketing gimmick, and that consumers cannot get any benefit from that. The company retracted his statements soon after. Apple is already working on its 2G 64-bit A8 processor and eventually Samsung will be next to move its ARM processors to 64-bit.
More damaging news perhaps was when a federal jury awarded ParkerVision past damages of $173 million for Qualcomm's infringement of ParkerVision patents. The jury also found that ParkerVision did not prove its claims of willfulness, which would have allowed the judge to enhance the damages awarded by the jury. The judge still has to make determinations on matters of law, including ParkerVision's request for an injunction against Qualcomm. Qualcomm took a hit of about 10 cents per share as a result of the ruling.
Qualcomm sold its entire stake in a wireless broadband business in India to partner Bharti Airtel for an undisclosed amount last month, which it acquired through a government auction in 2010. It paid about $1 billion for the spectrum and related licenses.
The company does not have many compelling fundamental reasons to buy shares at current levels. Investors need to be aware of price because that is what makes us money, and based on the Stock Traders Daily QCOM real-time trading report, the stock is moving closer to long-term support, but isn’t there yet. If QCOM continues to move lower, and tests long-term support, we would be buyers near support. If support holds, we would expect a move higher and an eventual test of resistance. We would only be buyers near support, and it is not there yet.
Stock Traders Daily has been providing comprehensive market analysis, and correlated trading strategies since January 2000, which was the virtual peak of the Internet Bubble. Our objective is to provide strategies capable of making money in any market environment, and we have been doing that since inception.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
These hot movers could rise by double digits in coming months.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.