Over the course of 2014 we have taken a shot with long exposure in Qualcomm (QCOM) on a couple of occasions, with little to show for it. The stock has been a massive under-performer to the entire semiconductor space with the Philadelphia Semi-Index (SOX) is up 18% ytd and Intel (INTC) up 30%. What’s fascinating about the under-performance is that despite the fact that INTC is expected to have more than double the amount of sales of QCOM in 2014 ($56 billion to $27 billion) at one point in the last 12 months QCOM had a greater market cap to INTC (now $168 billion to $125 billion).
One reason for the QCOM malaise could be the fairly sudden drop off in revenue growth from more than 25% a year for the least three years to only about 8% expected this year and next. Shares have been hit hard from the 52 week and multi-year highs in July, down almost 9%, as disappointing results in China have weighed on results:
Without any real catalyst until their fiscal Q4 earnings scheduled for Nov 5th, and then their Annual Analyst Day on Nov 19th in New York the stock could be rangebound between the $78 breakdown level of $78 post earnings and interim double bottom low for the year down near $72.
What’s interesting about QCOM’s performance from the 2009 lows in the market, is that unlike a stock like Starbucks (SBUX), that I discussed this morning (read here), QCOM has actually underperformed the S&P 500’s nearly 200% gains, only up about 150%. This on the heels of billions of dollars of share-buybacks.
This is not the first time you have heard it in this space, and I suspect it won’t be the last. But at this stage of the economic recovery, with the Federal Reserve pulling back from QE, and global growth concerns picking up again, specifically in China, this is not exactly the sort of stock that looks particularly attractive at this stage of the game.