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Qualcomm Slips to a 52-Week Low: What’s Taking It Down?


Shares of leading wireless chipset manufacturer, Qualcomm Inc. QCOM tumbled to a 52-week low of $48.92 during the trading session on Sep 8. However, the figure recovered marginally to close at $49.64, down 1.47%.

Over the past 52 weeks, shares of Qualcomm have ranged from a low of $48.92 to a high of $71.62. Average volume of shares traded over the last three months is approximately 8.59 million.

Why the Downturn?

Qualcomm has been facing regulatory proceedings of late. The company continues to receive charges for unfair business practices and licensing royalty payments. In May 2017, Qualcomm settled a licensing dispute with BlackBerry Limited BBRY by paying $940 million. Earlier in December 2016, South Korea's regulatory authority for economic competition, Korea Fair Trade Commission ("KFTC"), imposed an administrative fine of approximately 1.03 trillion South Korean Won (approximately $865 million) on Qualcomm due to unfair business practices. Meanwhile, the ongoing $1 billion lawsuit dispute with tech giant Apple Inc. AAPL continues to get bitter with time, which is badly affecting the company’s margins.

Aggressive competition in the mobile phone chipset market has also been hurting Qualcomm’s profits. The company faces severe competitive threats from its closest rival, Intel Corporation INTC, which has been redesigning chipsets for the mobile computing market. We wait to see if this hurts Qualcomm’s sales in the fiscal second quarter.

We believe that stiff competition, stringent regulatory norms along with anti-competitive and unfair business practices charges are reasons behind the decrease in the company’s share price

Price Performance

Over the past month, shares of Qualcomm have declined 7.3% compared with the industry’s decline of 5.6%.

Estimates on the Downswing

We note that the sales and Earnings Per Share (EPS) estimate for Qualcomm has moved down for the remaining quarters of 2017 and also for full-year 2017.

The sales growth for third-quarter 2017 and fourth-quarter 2017 is estimated to decelerate 6.5% and 1.0%, respectively. For 2017, sales is expected to drop 2.8%.

The EPS growth for third-quarter 2017 and fourth-quarter 2017 is estimated to decelerate 37.1% and 27%, respectively. For fiscal 2017, EPS is expected to drop 6.1%.

The downward estimate revisions reflect pessimism over prospects of this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Certainly Not a Broker’s Favorite

Given the challenges faced by the company, the stock is not a favorite pick for brokers right now.

Over the last 90 days, the Zacks Consensus Estimate of earnings for third-quarter 2017 and fourth-quarter 2017 has gone down 15.6% to 81 cents per share and 23% to 87 cents, respectively. Likewise, the Zacks Consensus Estimate for 2017 has plummeted 17 cents to $4.17 per share.

Given the wealth of information at the disposal of brokers, it is in the best interests of investors to be guided by broker’s advice and the direction of their estimate revisions. Notably, the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.

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