Qualcomm (NASDAQ:QCOM) traded at above $160 before its first-quarter results. After the report, the stock slumped to below $150 on Feb. 4. What happened?
The 5G chip giant of smartphones posted sales rising by 62% Y/Y to $8.24 billion. It missed estimates by only $20 million. QCT revenue rose by 81%. Handset, strong IoT demand, and RF front end, all contributed to the higher sales.
Qualcomm forecast revenue in the $7.2 billion range. The EPS guidance of $1.55 - $1.75 for Q2 is above consensus. The markets are over-reacting. After posting strong guidance and a strong quarter, the drop post-earnings is a buying opportunity.
QCOM trades at a price-to-earnings in the low 30 times range. It is a better deal than AMD (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA). Micron (NASDAQ:MU) also trades at similar multiples. But Micron depends on profitability in DRAM and NAND. That is a cyclical business. Intel and AMD are strong competitors. Conversely, Qualcomm has no real pressure from any semiconductor firm.
Qualcomm faced supply constraints but still managed to issue a strong outlook. With constrained supply and excess demand, the company is in a good position to expand margins.
QCOM stock is a good stock to buy at current levels.
