Qualcomm (QCOM) Stock Climbs on Suggestion That Chinese Investigation May Conclude Soon

NEW YORK (TheStreet) -- Qualcomm (QCOM) shares are up 1.7% to $74.57 on Wednesday following a Cowen note suggesting that the results from a Chinese regulatory investigation of the company could come to an end soon, citing Chinese media outlets. Chinese anti-monopoly officials announced in February that the company was under investigation for overcharging and abusing it's market position.

The firm believes that any potential punishment the company may incur as a result of the investigation will be minimal and that the wireless telecommunications product manufacturer may be in an even better position to collect licensing fees.

"Ultimately, we believe resolution of the NDRC investigation will enhance the company's long-term ability to collect royalties on substantially all LTE devices sold in China (including 3-mode), and open the door to resolution of one or more of the four major China-related QTL headwinds that weighed on initial F2015 guidance,"Cowen analysts said.

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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, 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 6.0%. 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 ($5.20 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
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