NEW YORK (TheStreet) -- Shares of Qualcomm Inc (QCOM) were stalling, lower by 1.22% to $63.88 in early market trading Monday, after the company was downgraded to "sell" from "hold" by analysts at Drexel Hamilton this morning.
The mobile chipmaker also had its price target cut to $60 from $55.
Drexel Hamilton analysts said the company is facing increased price competition.
The firm also reduced its 2016 earnings estimates as "intensified chipset competition sets the stage for royalty give-backs to hold share."
Analysts added that it sees risks including "a variety of cyclical economic factors upon which final demand for mobile handsets, tablets and computers are based, as well as several
competitive issues that look to carry weightier import in upcoming quarters."
San Diego, Calif.-based Qualcomm designs, manufactures and market digital communications products and services based on code division multiple access, orthogonal frequency division Multiple Access and other technologies.
Separately, TheStreet Ratings team rates QUALCOMM INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUALCOMM INC (QCOM) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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 and expanding profit margins. We feel its 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 0.1%. Since the same quarter one year prior, revenues slightly increased by 8.3%. 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 0.03 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 2.86, 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.
- The gross profit margin for QUALCOMM INC is rather high; currently it is at 67.17%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.27% trails the industry average.
- QUALCOMM INC's earnings per share declined by 44.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. 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 ($4.79 versus $4.40).
- You can view the full analysis from the report here: QCOM Ratings Report