Why Qualcomm (QCOM) Is Gaining Today

NEW YORK (TheStreet) -- Qualcomm (QCOM) was gaining 3.3% to $77.21 Monday after China Mobile (CHL) announced it will require all 4G phones to support five different mobile standards.

Beginning May 31, 2014, all 4G phones sold on the network will have to support TD-LTE, FDD-LTE, TD-SDCMA, WCDMA, and GSM.

The news caused Goldman Sachs  (GS) to set a price target for Qualcomm to $90while reiterating its "buy" rating for the chipmaker. Analyst Simona Jankowski said in a note to investors that Qualcomm could have an easier time collecting royalties on LTE devices sold in China thanks to the inclusion of WCDMA and FDD-LTE.

"Qualcomm has the most mature and broad portfolio of five-mode SOCs," Jankowski wrote. "Competitively, this is an advantage relative to the SOC portfolios of Marvell, Mediatek, and Spreadtrum, and could help Qualcomm's market share as China Mobile targets about 100mn LTE devices in 2014."

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TheStreet Ratings team rates QUALCOMM INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate QUALCOMM INC (QCOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • QCOM's revenue growth has slightly outpaced the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 10.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • QCOM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.50, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, QUALCOMM INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $2,781.00 million or 40.81% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 19.85%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: QCOM Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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