NEW YORK (TheStreet) -- Shares of Qualcomm (QCOM) are down 1.65% to $70.82 after the mobile chipmaker gave a more conservative five-year outlook than in the past as it faces an antitrust probe in China and more consumers there and in other developing countries buy lower-priced smartphones, Reuters reports.
China's expanding high-speed 4G network is driving demand for smartphones with leading-edge technology, but Qualcomm's opportunities have been clouded by a year-old antitrust investigation there and troubles collecting royalty payments from device makers, Reuters noted.
The company expects to grow its revenue between 8% and 10% annually over the next five years and its earning per share even more. In the past, Qualcomm has targeted double-digit annual growth in revenue and EPS over five years.
CEO Steve Mollenkopf told analyst on Wednesday at the company's annual investor day that Qualcomm's troubles in China were hurting its royalty business, called QTL, which provides most of the company's profits.
Qualcomm's overall revenue grew 6.5% in fiscal 2014, far below growth rates of around 30% in recent years. Analyst expect 5% revenue growth for 2015, according to Thomson Reuters I/B/E/S, Reuters said.
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, notable return on equity, expanding profit margins, growth in earnings per share and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- QCOM's revenue growth has slightly outpaced the industry average of 4.3%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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.
- The gross profit margin for QUALCOMM INC is rather high; currently it is at 64.21%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.30% is above that of the industry average.
- QUALCOMM INC has improved earnings per share by 29.1% 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 $4.40 versus $3.91 in the prior year. This year, the market expects an improvement in earnings ($5.19 versus $4.40).
- 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 26.2% when compared to the same quarter one year prior, rising from $1,501.00 million to $1,894.00 million.
- You can view the full analysis from the report here: QCOM Ratings Report