No. 1 fabless chipmaker Qualcomm (QCOM) is expected to print a fifth consecutive quarter of declines when it reports June-quarter earnings after the close Wednesday, but the Apple (AAPL) supplier will hit the black again in September on the iPhone 7, analysts say.
Qualcomm stock is up nearly 10% this year, outperforming IBD's 41-company Electronic Semiconductor-Fabless industry group which has gained 7.6%. Shares are forming a flat base, with a possible 56.37 buy point. Shares rose above their 50-day moving average on July 8 and remain above that key support line.
IBD'S TAKE: Qualcomm, with an IBD Composite Rating of 43 and Relative Strength Rating of 44, is not a highly rated stock. But another fabless chipmaker, Broadcom, has a highest-possible CR of 99 and an RS of 81, and it might be worth more of your time because it also is among companies working on what look to be sound bases.
For its fiscal Q3 ended June 26, Qualcomm is expected to report $5.58 billion in sales ex items and 97 cents earnings per share minus items, down 4% and 2%, respectively, vs. the year-earlier quarter, according to the consensus of analysts polled by Thomson Reuters.
In March, Qualcomm guided to $5.2 billion to $6 billion in sales and 90 cents to $1 EPS minus items for the quarter. Both sales and EPS have declined by double digits, year over year, for the previous four quarters. But Qualcomm has topped views the past three periods.
Fiscal Q4 ending Sept. 25 could signal a return to the black. For that quarter, Qualcomm is expected to report $5.74 billion in sales minus items and $1.09 EPS ex items, up a respective 5% and 20%.
In a challenge for Qualcomm, Apple is rumored to have tapped Intel (INTC) to source some of its iPhone 7 modems. Qualcomm is the incumbent supplier and Intel hasn't supplied for an iPhone since the 3G iteration in 2008.
Intel's IBD Composite Rating of 81 -- meaning it's performed in the top 20% of its group in earnings and sales growth, and other key metrics -- is stronger than Qualcomm's 43 CR.
Qualcomm edged down 0.2% to 54.75 at the close on stock market today. Intel lost 0.4% to 35.07. Apple shaved a penny off its price to 98.78.
