Qualcomm Stock Struggles for Direction as Earnings Loom

QCOM is down 6% in 2021

Jul 26, 2021 at 11:04 AM
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Semiconductor stalwart Qualcomm Incorporated (NASDAQ:QCOM) is an important player in the development, launch, and expansion of 5G, especially given the push-and-pull between American and Chinese chip companies. Later this week, the tech world will be watching as Qualcomm steps into the earnings confessional, set to report fiscal third-quarter results after the market closes on Wednesday, July 28. Ahead of the event, QCOM is enough of a player in the semiconductor space that its worth a deep dive into the stock's technical and fundamental setup. 

Qualcomm has a modest history of post-earnings reactions. There's the 15.2% bull gap last July, but also the 8.8% post-earnings drop back in February. Overall, QCOM averages a post-earnings move of 6.4% in the last eight quarters, regardless of direction. This time around, the options market is pricing in a 8% move for the stock on Thursday.

Qualcomm stock is down 6% in 2021, but remains up 61% in the last 12 months. Since February, the $145 level has proven difficult to topple. Despite the lackluster price action, 60% of the 20 analysts in coverage rate QCOM a "buy" or better, with zero "sells" on the books. Qualcomm stock also has a forward dividend of $2.72 and a dividend yield of 1.88%.

From a fundamental point of view, Qualcomm stock is perhaps one of the best valued stocks amongst those with a market cap above $100 billion. QCOM has a market cap of $163 billion and a price-earnings ratio of 20.75. However, what makes Qualcomm stock a promising investment is its impressive growth rate, which coincides well with their forward price-earnings ratio of 16.47. Furthermore, QCOM’s revenues are up by 25% and its net income has increased by 54% compared to what was reported for fiscal 2020. Overall, Qualcomm stock offers investors minimal risk, strong return potential, and guaranteed dividend payments in the long-term.

Options may be a prudent strategy both before and after earnings this week, considering the stock's Schaeffer's Volatility Scorecard (SVS) sits up at 72 out of 100. This means QCOM has exceeded option traders' volatility expectations during the past year -- a boon for premium buyers.


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