How Will QUALCOMM (QCOM) Stock React To Possible EU Antitrust Investigation?

NEW YORK (TheStreet) -- QUALCOMM Inc.  (QCOM) , the world's biggest mobile chipmaker, may face a European investigation related to a four-year-old complaint from a subsidiary of rival Nvidia Corp. (NVDA) , sources told Reuters.

An EU probe would come at an awkward time for Qualcomm, which is seeking to end an investigation by China's pricing regulator into monopoly practices. If found guilty of breaching EU rules, the company could face a fine of up to $2.5 billion, Reuters said.

Shares of QUALCOMM closed at $77.01 yesterday. 

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, growth in earnings per share and increase in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 9.0%. Growth in the company's revenue appears to have helped boost the 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 3.36, 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.
  • QUALCOMM INC has improved earnings per share by 45.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, QUALCOMM INC increased its bottom line by earning $3.91 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($5.32 versus $3.91).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Communications Equipment industry average. The net income increased by 41.6% when compared to the same quarter one year prior, rising from $1,580.00 million to $2,238.00 million. 
  • You can view the full analysis from the report here: QCOM Ratings Report
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