Qualcomm: A Cheaper Way to Play Apple

NEW YORK ( TheStreet) - If you're looking for a way to play Apple ( AAPL) earnings, there may be no better derivative than Qualcomm ( QCOM), which reports second-quarter earnings after the bell on Wednesday.

With its chips in Apple and Samsung products, as well as a host of others, Qualcomm is well positioned for the smartphone boom. Demand for all things Apple, in particular, is strong, and, as a key iPhone and iPad partner, Qualcomm stands to benefit.

Additionally, AT&T ( T) and Verizon's ( VZ) push to 4G/LTE (Long Term Evolution) networks also spells good news, according to Barclays Capital analyst Jeff Kvaal. "We expect Qualcomm to deliver another quarter of solid MSM unit shipments given healthy unit handset market volumes, including key partners Samsung and Apple, and strong demand for LTE, including the initial ramp of the 8960," Kvaal wrote in a recent research note.

The 8960 refers to Qualcomm's new dual-core Snapdragon chipset. Kvaal rates Qualcomm shares "overweight" with a $75 price target.

Shares of Qualcomm have been able to ride the coat-tails of smartphone and tablet growth this year, gaining 22.5% year-to-date.

TheStreet has already referred to Qualcomm as "the king of 4G".

As the trend towards mobility continues to grow, thanks to smartphones and tablets, Qualcomm should continue to reap the rewards, but Credit Suisse analyst Kulbinder Garcha notes Qualcomm is more leveraged to smartphone growth at this point. "Within the telecom equipment sector, we believe Qualcomm remains the highest quality business model with the best visibility," he wrote, in a note. He reiterated his "outperform" rating and $80 price target.

Qualcomm's business is so strong the company recently raised its dividend. Effective June 20, it will pay a quarterly dividend of 25 cents a share, up from 21.5 cents a share.

Investors will also be keen to hear Qualcomm's plans to tap the PC business. When Microsoft ( MSFT) announced that Windows 8 would run on ARM Holdings ( ARMH) chip designs, Qualcomm announced it was entering the PC business. Qualcomm licenses ARM designs and makes its own proprietary chips.

Analysts polled by Thomson Reuters expect the San Diego-based chipmaker to report earnings of 96 cents per share on $4.84 billion in revenue. That's slightly higher than the first-quarter, when Qualcomm earned 97 cents per share on $4.68 billion in revenue.

Qualcomm shares are trading lower in early Wednesday trading, down 0.39% to $66.97.

Interested in more on Qualcomm? See TheStreet Ratings' report card for this stock.

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-- Written by Chris Ciaccia in New York

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