New Qualcomm Trade Idea After Sharp Selloff
The firm has been trying to pivot as competition ramps up.
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NYSE traders
It's no secret that the competition has been ramping up for Qualcomm (QCOM) .
Their smartphone business, which has long been the firm's bread and butter, is running into a period of slower growth as core customers such as Apple (AAPL) are replacing equipment from vendors such as Qualcomm with in-house chips/modems. Simultaneously, South Korea's Samsung has reduced Qualcomm's place in that firm's Galaxy lineup. Over the six quarters, Qualcomm has regularly enjoyed double-digit (in percentage terms) revenue growth. For the current full year, Wall Street sees sales "growth" of -1.2%, with a "rebound" of 0.7% for next year. Yikes.
The firm is trying to pivot away from its past dependence upon smartphones and toward automotives, robotics and the Internet of Things (IoT) in an effort to diversity. That said, other firms have much firmer footholds in the PC market and in the development of generative and agentic AI. The scarcity of and increased costs associated with memory chips is creating bottlenecks in all of these businesses and further damaging Qualcomm's prospects.
At The Annual Meeting...
On March 17, Qualcomm's board of directors did approve an increase in the quarterly cash dividend from $0.89 to $0.92 (+3.4%), taking its yield up to 2.73%. In addition, the board authorized a new $20 billion stock repurchase program. That was in addition to the firm's existing authorization that had $2.1 billion worth of buyback-related authority left in it. The stock did not react favorably. In fact it would be hard to say that the stock reacted at all.
Earnings
Qualcomm will report the firm's fiscal second quarter financial results on or about April 29. Wall Street is looking for an adjusted $2.56 per share, which compares poorly to the year ago result of $2.85. On top of that, sales are expected to contract by almost 2.4% on a year-over-year basis. Interestingly, of the 27 sell-side analysts that I know of who cover QCOM, 22 have reduced their earnings estimates for the quarter, while none have revised those estimates higher.
The Chart
Qualcomm has sold off quite sharply, down 36% from the high of a stray price spike back in October and down 28% from a more realistic high in early January. Readers will see that the stock came off of a double-top pattern of bearish reversal in late 2025 and moved into a steady downtrend. That said, the shares have more or less stabilized since mid-March, which bode well as the stock could be primed for an earnings surprise. This stock could be a candidate for risk-averse traders, for a bull call spread.
Here's an example (in minimal lots):
- Purchase one May 1 (after earnings) QCOM $135 call (near the 21-day EMA) for about $5.60
- Sell one May 1 QCOM $140 call for roughly $3.65
- Net debit: $1.95
- Notes: This trader would be risking the net debit of $1.95 to try to win back an even $5.00 for a max profit of $3.05 or 156%.
Related: Emerging Market Selloff Shows Flashes of 2008 Financial Crisis
At the time of publication, Guilfoyle had no positions in any securities mentioned.
