Qualcomm Inc. (NASDAQ: QCOM) will be reporting its fiscal third-quarter earnings on Wednesday after the close. With shares having been weak, and with weakness persisting in the chip sector, investors will be looking very closely. The big question is whether the value stock argument will be brought up ahead.
The Thomson Reuters consensus estimates call for $0.95 in earnings per share (EPS) and $5.85 billion in revenue. That would be against $1.44 EPS and $6.81 billion in revenue for the same quarter a year ago.
This top technology stock has greatly underperformed so far this year. Qualcomm is reported to be losing chip business, and activist investors like Jana Partners are trying to pressure the company to spin off that chip business. Jana also wants Qualcomm to cut costs, while even further accelerating its persistent share buybacks. At the same time it wants Qualcomm to improve disclosures and refresh its board. Jana recently was shown to have roughly a $2 billion stake.
What is interesting about Qualcomm is that the company may be resistant to activists. The company itself has not indicated that it would really be willing to spin off the chip business. Unlocking the value of intellectual property always sounds good, but it is not always a successful move.
Qualcomm options indicate that investors are braced for a move of $2.00 or $2.25 in either direction. Despite attempted share price gains earlier this week, the stock is now only $3.00 above its 52-week low.
As far as whether Qualcomm is now a value stock, it is valued at less than 13 times expected 2016 earnings per share. The chip giant even has a higher dividend yield that is already north of 3%.
Qualcomm shares were trading at $64.41 ahead of earnings, in a 52-week range of $61.48 to $81.97. The stock has a consensus analyst price target of $74.00 and a market cap of $105 billion.
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