Tech stock to watch: QUALCOMM, Inc. (NASDAQ: QCOM)

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QUALCOMM, Inc. (NASDAQ: QCOM) stock rose over 0.2% on 30th April, 2020 pre-market session (as of 8:58 am GMT-4 ; Source: Google finance) after the company posted better than expected results for the second quarter of FY 20 on the back of higher prices for its mobile chips and forecasts third quarter revenue to mostly in line with expectations as it signed more contracts for 5G phones, which use higher-priced chips, at a time when the COVID-19 pandemic has disrupted production channels and led to a fall in demand for smartphones. Further, the coronavirus had reduced the demand for handsets by about 21% in the second quarter from a year earlier, and forecast 30% reduction in handset shipment in the third quarter. The company continues to advance the 5G road map and support customers while meeting a very complex set of R&D and supply chain requirements. For the second half of calendar 2020, there are few regions that might face with minor delays in 5G network deployments, but overall 5G is progressing as planned and the company is well positioned to drive the rapid adoption of 5G globally.

Meanwhile, the fall in device sales means less profit and revenue for Qualcomm, as it makes most of its profit from licensing its technologies that allow phones to connect to wireless data networks. The company, during the second quarter had sold chips at an average price of $31.8 compared with their earlier price of $23, which is a sign that the company got the benefit from an increase in demand for high-end chips. Qualcomm’s second-quarter revenue from its licensing business stood at $1.07 billion, which is above estimates of $1.01 billion, according to FactSet.

Moreover, the company now has signed more than 85 5G license agreements, up from 80 license agreements last quarter. The company has recently signed new long-term global patent license agreements with two leading Chinese handset suppliers, OPPO and Vivo, to cover 5G multi-mode mobile devices.

QCOM in the second quarter of FY 20 has reported the adjusted earnings per share of 88 cents, beating the analysts’ estimates for the adjusted earnings per share of 79 cents, according to Zacks Investment Research. The company had reported the adjusted revenue of $5.22 billion in the second quarter of FY 20, beating the analysts’ estimates for revenue of $5.09 billion.

Qualcomm forecast total revenue to be in the range of $4.4 billion to $5.2 billion for its third quarter. Analysts had estimated revenue of $4.89 billion, according to IBES data from Refinitiv.

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