The Tale Of Two Tech Stocks
Last week was big for tech earnings.
And some were a lot better than others.
First, let’s talk about Qualcomm (ticker: QCOM), a semiconductor company focused on chips for smartphones, computers, and vehicles.
It reported earnings after the close on Wednesday and its stock price jumped over 15% the following day.
Did Qualcomm blow away earnings expectations or forecast faster growth?
Surprisingly, it didn’t.
What caused the stock jump were comments from Cristiano Amon, the CEO of Qualcomm.
He said they’re expecting the smartphone market to rebound based on licensing agreements with some smartphone makers.
Handheld revenue (i.e. smartphones) accounts for over 50% of Qualcomm’s revenue, so a rebound in the smartphone market is huge news.
Plus, Qualcomm is looking to expand into the data center business.
While Qualcomm is booming, other tech companies are floundering.
Meta Platforms (ticker: META) also released earnings following the market close on Wednesday.
However, investors freaked out from the earnings release, and Meta’s stock price dropped over 9%.
Meta blew out earnings expectations by reporting an EPS over $10 vs. an expected $6.67.
But capital expenditures scared investors about rising costs of AI development.
Meta announced it’s expecting to spend an additional $10 billion over prior estimates.
What should we do?
Qualcomm and Meta are actually a really interesting pair for AI.
Higher AI costs are great for companies like Qualcomm, since they mean more demand for data centers and Qualcomm’s products running them.
But higher AI costs are bad for companies like Meta, since they need to pay more to develop their AI products.
However, if AI costs start to drop, it helps Meta and hurts Qualcomm.
So Meta and Qualcomm act as a hedge against one another.
And both companies are really interesting stocks.
Meta’s price-to-earnings (P/E) ratio of 20x is near a 3-year low for the company.
Plus, its return on equity (ROE) of 34% is one of the highest in its industry and near an all-time high for Meta.
Qualcomm is no slouch either.
Despite the recent runup in price, Qualcomm’s forward P/E ratio (which uses next year’s projected earnings) is only 16x, one of the lowest in its industry.
And while it isn’t as high as Meta’s, Qualcomm’s profit margin of 11% is more than double the semiconductor industry average.
What trades did you make during tech’s big earnings week?
Coach Parker
Category: Stocks
