Qualcomm Looks Ready to Break Higher

Qualcomm stock, which is still down 14% from its 52-week high, is a bargain.
By Richard Saintvilus ,

Qualcomm (QCOM) - Get Report stock looks ready to break higher, thanks to better-than-expected third-quarter results and strong guidance issued after the closing bell Wednesday. The shares spiked 7.5% in the premarket session, reaching $60.

Qualcomm stock has gained more than 40% since the shares sank to a 52-week low of $42.24 on Feb. 11. It has risen 15% since I recommended the shares on Feb. 26. Then, Qualcomm's cheap price and solid yield was too attractive to pass up.

Today, the company's growth potential is driving the story. The stock chart below, courtesy of TradingView, points to possible new 52-week highs in the second half of the year.

Qualcomm stock closed Wednesday at $55.82, up 1.23%. The stock has now risen 11.7% year to date, against a 6.3% rise in the S&P 500 (SPX) . With lingering revenue struggles and the decline in market share now out the way, Qualcomm's fundamentals and technicals have drastically improved.

The chart shows the stock's massive 40% move since bottoming out in February. Between the end of March and early May, the shares consolidated, bouncing off support at the $50 level on multiple occasions. That allowed the 20-day and 50-day moving averages to cross paths. Then from May 17 to May 25, the stock shot up about 8.5%, towards resistance at $55.80 (the red line). But heavy selling pressure sent the shares back down following a post-Brexit move toward $51. That's important to note, since support at the time was $50.

Fast forward two week later. Qualcomm stock is back toward resistance and seems poised to finally break above that barrier. Once that threshold is breached, $65 -- its July 2015 high -- is the next target.

Qualcomm, which is still down some 14% from its 52-week high of $64.95, is still bargain, especially as revenue in its bread-and-butter wireless chip business has begun to grow again.

Prior to Wednesday's announcement, Qualcomm was projected to grow annual earnings at an average rate of 12.5% in the next five years. Analysts will now have to revise those estimates and raise their price targets, which currently are at $58.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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