QUALCOMM, Inc. (QCOM) — It’s been a tough year for this technology giant, with shares falling more than 30%, but I think QCOM stock represents a bargain for traders at current levels.
S&P Capital IQ Equity Research also considers the stock’s valuation “extremely attractive.” Its analysts estimate operating earnings will come in at $4.40 per share in fiscal 2016 (ending in September), up 37% from the previous year, and increase another 15% in fiscal 2017 to $5.05. Their 12-month target of $68 is based on 15.5 times the FY 2016 EPS estimate, which is below the peer average.
In mid-December, QCOM stock jumped when management concluded it would not split into two separate companies. Shares also rallied Monday after it was announced Qualcomm had signed a 3G and 4G patent license agreement with a Chinese company. Growth in smartphones in emerging markets could result in higher-than-expected earnings.
Technically QCOM stock is in a bear market, but recent high-volume days appear to indicate a selling climax has occurred. I believe much of the recent selling has been of a tax-loss nature, and the rally off the December low has taken on the form of a “V” recovery, suggesting a bottom is in place.
Buy QCOM stock under $50 with a stop-loss at $47 and a trading target of $60. This target recognizes the open gap at $60.07 to $56.81 made early in November. If successful, traders could achieve a gain of 20%. Shares also currently throw off an annual yield of 3.8%, and management has said it will continue its share repurchase program.
