In front of Qualcomm, Inc. (NASDAQ:QCOM) earnings report Wednesday night, the question of how QCOM investors are preparing for the event might be raised.
Let’s take a look at Qualcomm’s recent announcements, price chart and what, if anything, the options market is suggesting for bulls, bears and less directionally motivated traders.
QCOM Stock Earnings Picture
Ahead of QCOM’s Wednesday night fourth-quarter earnings release analysts are forecasting profits of $1.13 per share. Street expectations imply a gain of 24% in earnings growth over the year-ago period’s 91 cents.
Qualcomm’s revenues are estimated to grow by a lesser 7.1% to $5.84 billion compared to 2015’s $5.5 billion result and dip slightly on a sequential basis from Q3’s $6 billion in sales.
Despite a couple additional smartphone rollouts by customers, QCOM investors could be anticipating potentially weaker-than-forecast top-line results due to fallout from Samsung’s Note 7 product recall.
Also of importance will be further details on Qualcomm’s planned acquisition of NXP Semiconductors NV (NASDAQ:NXPI). The near $44 billion merger is one of largest for the company and has produced its share of bullish fans and bearish naysayers.
QCOM Stock’s Short-Term Trading Record
QCOM has established a strong pattern of beating Street profit views. Over the past couple years, the company has topped estimates 83% of the time with beats on 10 occasions compared to two profit misses.
Investor reaction in QCOM has proven a bit spottier. Shares have seen price declines in five of the past six announcements in the immediate aftermath of earnings release. Working backwards, Qualcomm shares have moved 7.37%, -0.80%, -8.30%, -15.24%, -3.75% and -0.87% on a close-to-close basis following the announcement.
The net movement in QCOM stock has resulted in an average decline of -3.6% by the close of business the next trading day. Variability of 7.7% based on a one standard deviation reading yields an estimated range of -11.3% to 4.1%.
Qualcomm’s seven-day stock performance reflects an average drop of -1.1%, standard deviation of 8.1% and range of -9.2% to 7%.
QCOM Stock Weekly Chart
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In 2016, shares of Qualcomm have recaptured nearly 70% of the prior 18 months’ maligned, but equally trendy, price trend.
With shares above key Fibonacci and moving average resistance, there’s little reason to not see more gains ahead for QCOM and an eventual retest of 2014’s high near $82. On potential weakness above $60, bullish traders might consider the price action as an opportunistic technical purchase within QCOM stock’s current uptrend.
QCOM Options Pricing
In Tuesday’s early going, trading in QCOM options has been quiet. Implied volatility however, is sitting near 52-week highs.
The Weeklys Nov. 4 $68.50 straddle market points to a 68% chance that QCOM will remain within an approximate price range from $64.75 to $72.75 through Friday’s expiration. The math behind this calculation is based on implied volatility of 63.5% with three trading sessions remaining.
The Weeklys contract is the purest play on the earnings event and tells us what traders collectively expect from QCOM shares in the immediate aftermath of its quarterly announcement, even during quiet conditions such as Tuesday’s first half of trade.
The dollar move up or down works out to about 5.8% in QCOM shares by Friday’s close. The pricing is mixed relative to recent historical reactions, but suggests traders are collectively anticipating a decent-size price move in Qualcomm this earnings period.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
