Qualcomm (NASDAQ:QCOM) was sitting at record highs back in January. Even as late as February, finally breaking the $100 ceiling seemed like a possibility for QCOM.
However, just weeks later, the novel coronavirus slammed the stock market and Qualcomm stock quickly lost more than a third of its value.
With the company’s Q2 earnings coming on April 29, and QCOM in recovery mode over the past month, what’s in store for investors? Will the 5G march resume and help push shares back toward that $100 level?
The Difference Three Months Can Make…
At the start of February, Qualcomm was preparing to release its Q1 earnings. QCOM stock was trading at over $86. At the time, InvestorPlace contributor David Moadel wrote that once the Q1 numbers were revealed, there was potential for QCOM to break through the $100 ceiling.
Qualcomm came close. Feb. 12 it closed at $91.72, but then the coronavirus pandemic began to hammer the market.
On March 20, QCOM closed at $60.91, the bottom of what had become a nearly 34% drop over the course of five weeks. Now, with its Q2 earnings report looming, QCOM is at $73.81 after a month of largely positive movement.
QCOM’s Q2 Earnings Guidance
Qualcomm will be reporting its Q2 numbers after the markets close on April 29.
On Feb. 5, the company issued guidance for the quarter as part of its Q1 earnings report. At the time, Qualcomm said it was projecting Q2 revenue of between $4.9 billion and $5.7 billion, with EPS of between 80 cents and 95 cents.
The company noted:
“Our strong fiscal first quarter financial performance reflects a significant inflection point for Qualcomm as we begin to realize the benefits from the ramp of 5G.”
The concern will be whether the coronavirus pandemic has begun to slow that 5G ramp up. We may see a sign of that on April 29, but that sign is more likely to come via Q3 or full-year guidance.
Analysts have revised their expectations for Q2 downward over the past three months. In February, they were looking for EPS of 86 cents, but that has since dropped to 80 cents — the bottom end of Qualcomm’s guidance.
On April 21, the company announced it will be paying a quarterly cash dividend of 65 cents per share on June 25. That could be taken as a positive sign.
In the wake of the coronavirus pandemic, many companies are under pressure to hold onto cash and are choosing to eliminate dividends altogether. The dividend payment suggests QCOM isn’t feeling that pressure.
Bottom Line on Qualcomm Stock
Three months ago, there was speculation that Qualcomm might have the momentum to break the $100 level in 2020. Royalties were coming in once more from Apple (NASDAQ:AAPL), and 5G was poised to go mainstream — with the expectation that consumers would be lining up to upgrade to new 5G-capable smartphones.
Obviously, much has changed since then.
We’ll have to wait until April 29 to find out exactly how much the coronavirus has impacted Qualcomm’s bottom line. Going forward, there are concerns that there will be ongoing fallout from the pandemic, even once shutdowns end. That includes the possibility that Apple could see delays in releasing its 5G iPhone 12. There are also worries that a post-pandemic recession will cut consumer demand for non-essential items such as expensive new smartphones.
In other words, there are still storm clouds on the horizon, and they could rain on QCOM’s parade. Most investment analysts are still optimistic that Qualcomm stock is going to continue its recovery in 2020. However, those polled by CNN Business have a median 12-month price target of $95, showing a lack of confidence that 2020 will be the year QCOM finally breaks through that $100 ceiling.
That being said, if they’re right, $95 is still nearly 29% upside, which is why Qualcomm remains a consensus “buy.”
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
