QUALCOMM (QCOM) Stock Declines Following Ratings Drop

QUALCOMM (QCOM) shares are retreating on Monday after Nomura Securities downgraded the semiconductor company to 'neutral' from 'buy' and cut its price target to $60 from $75.
By U-Jin Lee ,

NEW YORK (TheStreet) -- QUALCOMM (QCOM) - Get Report  shares are retreating 1.18% to $52.79 on Monday morning after Nomura Securities downgraded the San Diego-based semiconductor company to "neutral" from "buy" and cut its price target to $60 from $75.

"Qualcomm indicated last week that slower than expected progress in signing up new licensees on 3-mode devices sold in China," analysts said.

Given China's uncertain economic backdrop, analysts' are cautious about the company's future.

It appears that going forward, these challenges around collections in China are going to persist, analysts noted.

QUALCOMM develops, designs, manufactures, and markets digital communications products and services in China, South Korea, Taiwan, the U.S. and internationally.

Separately, TheStreet Ratings team rates QUALCOMM INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate QUALCOMM INC (QCOM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.16, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for QUALCOMM INC is rather high; currently it is at 64.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.46% is above that of the industry average.
  • Net operating cash flow has slightly increased to $1,684.00 million or 4.01% when compared to the same quarter last year. Despite an increase in cash flow, QUALCOMM INC's average is still marginally south of the industry average growth rate of 9.34%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.85%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 39.63% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Communications Equipment industry. The net income has significantly decreased by 43.9% when compared to the same quarter one year ago, falling from $1,894.00 million to $1,062.00 million.
  • You can view the full analysis from the report here: QCOM
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