/QCOM Stock: It’s Time to Chill and Take Profits in Qualcomm (via Qpute.com)

QCOM Stock: It’s Time to Chill and Take Profits in Qualcomm (via Qpute.com)

If you bought shares of Qualcomm (NASDAQ:QCOM) stock back in 1999 at $88 a share, I feel a bit sorry for you. And if you held on to QCOM stock throughout the decades, you finally achieved break-even last week and now you’re in the green.

QCOM Stock: It's Time to Chill and Take Profits in Qualcomm

Source: Akshdeep Kaur Raked / Shutterstock.com

What a long, strange trip it has been as shareholders waited patiently for an event that would bring Qualcomm stock back to its former glory: an earnings report that crushed analyst expectations, for the most part.

Yet, there may be some eager traders considering taking a long position now — and for them, I’m suggesting watching, waiting and chilling on the sidelines because the celebration may be short-lived.

A Banner Week for QCOM Stock Holders

It’s fascinating to consider how far Qualcomm as a company has come since the dot-com bubble days of the late 1990s — and how far the broader semiconductor industry has come. Just recently, I came across a quote in a research study conducted by the University of Nebraska’s Robert Denicola underscoring the astounding progress made in the area of technology and particularly memory storage:

“With chipmakers nearing the point at which they are manipulating matter as small as atoms, it is likely that within a few years they will reach the physical limit on how small semiconductors can become … However, scientists are already developing new methods of computing, including quantum computers that replace classical digital computing with processing that relies on the quantum-mechanical properties of energy and matter.”

All of the world’s best scientists couldn’t prevent the impact of the trade war on tech stocks, however, as microchip companies took a severe beating in the summer of 2019. The semiconductor market relies heavily on open trade, and QCOM stock was vulnerable as Presidents Trump and Xi escalated the ongoing tariff tussle.

Even with these headwinds, the Qualcomm stock price managed to touch its all-time high price briefly in May before it tumbled back down to the $65 area. Like the hero of a superhero film, however, QCOM stock gradually started climbing its way out of the abyss in October; an upcoming earnings report on Nov. 6 after the closing bell provided a glimmer of hope that Qualcomm could, at last, vindicate its long-standing supporters.

And so it happened, and it was truly glorious. Okay, maybe I went a little too far with that one, but it was pretty darned good. Qualcomm beat on earnings per share, revenues and adjusted operating margin, and QCOM stock took off like an eagle into the deep blue firmament.

Cool Your Jets, Qualcomm Bulls

Beyond the imagery, the numbers were rather impressive: third-quarter non-GAAP earnings per share of 78 cents versus the analyst consensus of 71 cents, revenues of $4.8 billion versus the expected $4.756 billion, and adjusted operating margins totaling 22.9% versus the projected 22.5% all added up to cheers in the pit and a buying spree on the Street.

That’s all fine and good, but don’t ignore the fine print: compared to the same quarter of last year, Qualcomm’s third-quarter 2019 earnings per share were down 12.4%, while the company’s revenues were down 17% over the same time frame. Those not-so-little details didn’t dissuade the bidders from bidding and the peanut gallery from cheering as the QCOM stock price rallied without mercy.

As I write this, the price-to-earnings ratio of Qualcomm stock stands at around 30. That’s a bit too lofty for my taste and certainly higher than it was for much of 2019. Pullbacks are my bread and butter, and I’m more than happy to offer kudos to those who profited from the post-earnings rally and wait for the next train to pull up to the station. And believe me, there’s always another train coming sooner or later.

The Takeaway on Qualcomm Stock

If you held onto QCOM stock for all these years, you have the patience of a saint and I salute you. You have every right to celebrate, and I have every right to sit quietly and wait for the next pullback to pick up Qualcomm shares at a more reasonable, less hype-fueled price point.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

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