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Stop Overlooking Qualcomm—Here’s What the Market’s Missing
Written by Sam Quirke
Key Points
Qualcomm has slid about 10% from its pre-earnings level despite solid results.
Revenue rose year-over-year, EPS topped analysis expectations, and guidance also came in hot.
The stock’s RSI is already nearing oversold levels, while sellers have failed to break last week’s low.
Shares of tech giant Qualcomm Inc. (NASDAQ: QCOM) are trading just under $148 after a sharp post-report slide, a bitter pill for investors who had been cheering a steady rally since April. That uptrend marked a welcome change from years of frustrating chop, so the swift sell-off feels painful.
Step back, though, and the story looks very different. Last week’s numbers were not only fine, but also the kind of update that normally pushes a stock higher.
Revenue landed in line with expectations and grew at a double-digit rate from a year ago. Earnings per share beat consensus on a non-GAAP basis, and more importantly, management’s outlook signaled confidence.
The high end of its revenue guidance came in above what the Street had penciled in, and the same was true for earnings. On the face of it, this was the combination investors typically want to see heading into the back half of the year, yet the stock finds itself down nearly 10% from its pre-earnings level.
Why the Market’s Reaction Looks Off
So why the sell-off?
A single narrative seems to have taken over, at least for now: anxiety that Apple Inc (NASDAQ: AAPL) will continue shifting modem development in-house, which could end a long-standing line of business for Qualcomm.
However, that risk is not new, and management addressed it directly in the report and reiterated that Qualcomm’s growth does not depend on a single customer. The company has been expanding and diversifying its revenue streams for some time, so this should remain a priority.
The valuation landscape favors the bullish side. Qualcomm remains one of the cheaper ways to own a leading semiconductor stock compared to the mega-tech cohort.
And the good news for those of us on the sidelines weighing up a position right now—this discount still exists even as the company’s execution continues to improve and management’s guidance points higher.
What the Chart Is Signaling Now
Technically, the uptrend from April has been broken, and shares are back to levels last seen in early spring. That matters. However, bearish momentum looks to be nearing exhaustion on the downside.
The stock’s relative strength index (RSI) is approaching extremely oversold territory, a zone that has marked turnaround points for Qualcomm in the past. Equally important is the fact that sellers have failed to send the price below its post-earnings low on two straight attempts, a sign that buyers are starting to step in in earnest.
Investors should watch the next few sessions to confirm this. If Qualcomm’s price stays above last week’s low, the chances increase that a new support level is forming. A decisive close back above the initial gap-down area would strengthen the case that the sell-off was a temporary shock, rather than the start of a full reversal.
The Analysts Remain Bullish
The bullish thesis is supported by the fact that even as investors rushed for the exit last week, Wall Street has not given up.
Qualcomm has enjoyed several bullish ratings and updates from analysts in recent weeks, including last week’s update from Sanford Bernstein, which also gave the stock a $185 price target. From where Qualcomm closed on Monday, that’s pointing to a targeted upside of some 30%, not to be sniffed at.
The consistent messaging in these updates matters; they all highlight a still-attractive valuation, an improving growth runway, and a revenue-diversification strategy that’s starting to pay dividends.
That does not guarantee a straight line higher, but it does suggest that the path of least resistance may still be up once the dust settles.
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