Time to hang up on Qualcomm
Selling shares of the company as we head into a quarterly earnings announcement.
Last quarter, Qualcomm's shares dropped 14.3% -- or $6.72 a share -- on Jan. 28, the day after the company released first-quarter earnings and announced guidance for future quarters. In its guidance, Qualcomm executives predicted lower-than-expected revenue and earnings for the second quarter.
Since then, the company has restored most of the decrease it predicted three months ago. But Qualcomm has a record of delivering earnings surprises -- and the surprises aren't always pleasant.
But that's not the reason I'm selling these shares. My read of the technology sector shows that cell phone selling prices -- and hence the selling prices for the things that go into cell phones, such as Qualcomm's chips -- will remain under pressure well into 2011. (This isn't to say that cell phone prices will increase in 2011; it's just that I don't see prices breaking their downward trend before that.) That will keep pressure on margins for just about every company in the sector.
On the other hand, I see margins improving in other parts of the technology sector. Intel (INTC), for example, raised its forecast for gross margins for 2010 to a range of 62% to 66%. (Intel is already a member of the Jubak's Picks portfolio. For more on Intel's recent earnings report, see this post).
And that means I think you can find better technology stocks than Qualcomm to buy right now. So, I'm selling this position with an 8.1% loss since I added it to Jubak's Picks on July 15. I'll have a new technology buy to replace Qualcomm Tuesday.
At the time of this writing, Jim Jubak planned to sell his personal position in Qualcomm in three days.
Copyright © 2014 Microsoft. All rights reserved.
The company complains after the son of Florida State's football coach is televised wearing -- gasp -- Under Armour.
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.