Qualcomm: Strong Quarter Can Further Influence The Investor To Buy

Author's Avatar
Mar 24, 2015

As the traffic on the internet increases, need for speed is also creating a market for various companies that are equipment and chip manufacturers for 3G and 4G LTE network. Qualcomm (QCOM, Financial) is one such chipmaker that is focused on this growth market. Market analysts anticipate that the WiFi equipment alone will represent a market size of $4 billion in the year 2015. The company is also a chip manufacturer for smartphones.

Strong quarter

The company recently posted its earnings for the first quarter of the fiscal 2015 and the fiscal year started on a high note. In fact, the first quarter was a quarter with new records for the company. The revenues increased by 7% year over year, to records $7.1 billion as compared to $6.6 billion in the same quarter last year. Furthermore the company also recorded a sequential revenue growth of 6% compared with the previous quarter that recorded $6.7 billion.

Comparative segmental revenue

 Segment Q1-2015 Q1-2014 YoY
1 Equipment and services $5,216 million $4653 million 14% up
2 Licenses $1,883 million $1969 million 4% down

The company has also recorded growth in its earnings. On GAAP basis, the company’s net income increased to $1.971 million ($1.17 per share) as compared to earnings of $1,444 million ($0.84 per share) in the same period last year. The earning also surpassed the consensus estimate of $1.11. Quarterly operating income was $2,064 million as compared with $1,493 million in the same quarter last year.

The strong quarter for the company was mainly due to strong sales of the chipsets. Total shipment of the chipset increased by 27% year over year, to records 270 million units of chipsets. The sale of chipset even surpassed the management guidance of 260 million for the first quarter of the fiscal 2015.

Journey ahead

After a robust first quarter, the company anticipates the growth momentum to continue for the next quarter. For the second quarter, the company anticipates the revenue to be in the range of $6.1 billion to $7.5 billion, up by 2%-12% as compared to the recorded revenue $6.4 billion in the second quarter of the fiscal 2014. The anticipated revenue is in line with the revenue estimated by consensus of analyst that foresees revenue to be around $6.5 billion for the second quarter of the fiscal 2015.

Consensus of market analyst also anticipates that the company can grow by 8.4% next year, and is anticipated to attain growth of 10.5% for next five years.

Paybacks

The share repurchases programs and dividends policy has always influenced the investor as it gains more faith in the company. The faith is mainly as the company regularly implements its share repurchase programs with share buyback and also declaring regular dividends to its investors. In the first quarter of the fiscal 2015, the company returned $2.4 billion to its investors in form of dividends and share repurchases. The company repurchased 22.9 million by spending $1.7 billion and additional $697 million was retuned in form of dividends at $0.42 per share.

Conclusion

Qualcomm had a strong start in the fiscal 2015 recording year over year growth in top and bottom line. The forward P/E ratio of 12.7 is quite impressive and can provide good return in long run. Furthermore the company maintains a debt free balance sheet with $31,603 million in cash. Investing on a debt free company can always be safe for investors who are looking for longer run. I would recommend buying Qualcomm.