Zacks_Analysts' Blog : Qualcomm Remains Neutral - Analyst Blog

Qualcomm Inc. (QCOM) continues with its dream performance, reporting a record high first quarter of fiscal 2012. Net income was up 20% year over year and a massive 33% sequentially, indicating the company’s  operating efficiency. Management is quite confident that the company will be able to maintain its current pace of revenue and earnings growth for at least next five years.

There are primarily four reasons for this positive outlook: (1) gradual introduction of 4G LTE enabled mobile handsets in the developed markets of the U.S., Japan, and South Korea (2) massive growth of 3G smartphones in the emerging markets, particularly in China, where the company has strong foothold (3) Qualcomm’s growing association with Apple Inc. (AAPL) for its iPhones and iPADs and (4) a diversified product portfolio.However, the stock price has soared nearly 33% in the last six months. We thus reaffirm our Neutral recommendation on the stock.   

Qualcomm has firmly established its leadership position in the high-end smartphone segment. Several analysts have opined that Qualcomm captured market share from its arch rivals, STMicroelectronics N.V. (STM)and Intel Corp. (INTC) in the previous quarter.

Intel’s Infineon chipset was a major supplier to Apple's iPhone. However, it now appears that Qualcomm’s Snapdragon platform has taken the center stage. Apple’s upcoming iPhone 5 and iPAD 3 may become potential growth drivers for the company in near future.

Qualcomm received a shot in its arm from the upcoming Windows 8 operating system of Microsoft Corp. (MSFT). The two entities are collaborating to develop chipsets from Snapdragon platform for notebook and tablets that will use Windows 8 operating system.

In addition, Qualcomm’s Gobi mobile Internet connectivity solutions will provide 3G/4G LTE connectivity to those devices that will run on Windows 8 software. Sanpdragon also supports Windows Phone 7 operating system. Qualcomm is the sole chipset developer for both Windows smartphones and Windows notebooks.