Blame Apple (NASDAQ: AAPL). Despite reporting a solid third quarter, Qualcomm (NASDAQ: QCOM) stock trended sharply lower after issuing a warning on its outlook. Smartphone demand is strong and innovation will support Qualcomm’s revenue but clouds are looming, thanks to Apple.
Qualcomm earned $0.83 a share in Q3 on revenue of $5.3 billion, beating consensus on both metrics. This is a strong result despite Apple not paying the agreed royalty rates.
Apple convinced its suppliers not to pay Qualcomm the previously agreed upon royalty rates. Despite the latter group agreeing on the rates long before Apple entered the smartphone business,
Apple will cover any losses associated with losing its case against QCOM. Given the near-term headwinds, the stock is not for day traders or even short-term investors. Patient value investors with a long-term outlook are better suited with investing in QCOM stock. If the company proves victorious in the court, it may command valuations similar to that of Nvidia (NASDAQ: NVDA) and Broadcom Ltd. (NASDAQ: AVGO).
Takeaway
Qualcomm’s prospects are strong if the legal decisions favor the company. Investors may collected the $2.28/share dividend in the meantime. The stock will pay $0.57/share on Sep. 20 for shareholders of record Aug. 30
