Stock Pick: The chips are down for Qualcomm Inc. (QCOM)

iPhone 6 should provide a boost

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Chart showing trailing 12-month stock performance of Qualcomm, Inc.

For many investors, earnings seasons is a little like the race for the Stanley Cup. Everyone’s watching to see which companies will score big and which ones will outperform their peers. One company that a lot of people are keeping their eye on is San Diego-based Qualcomm (NASDAQ: QCOM), a $138 billion market-cap semiconductor company.

While the company reports its earnings after markets close on July 23, some analysts are already predicting victory. Earlier in the day, Tom Sepenzis, an analyst with Northland Capital Markets, upgraded the stock from a market perform to outperform because he’s confident that the company will top consensus estimates.

He thinks it will make at least $6.4 billion in revenues and $1.21 in earnings per share in the quarter ending in June, though it could be as high as $6.6 billion and $1.25 EPS.

The company, which makes chips for mobiles, among other things, has benefited from the launch of the Samsung Galaxy S5, the HTC One, the LG G3 and other mid-tier Android-running phones. Sepenzis thinks that $4.6 billion in revenue will come from mobile-related sales.

Going forward, Sepenzis is bullish on long-term evolution (LTE) — a wireless standard that’s faster than 3G — and points out that LTE adoption is expanding quickly in China and other emerging markets.

The company, which also works with Apple, will also benefit from sales of the new iPhone 6 once it comes out later this year, said Michael Walkley, an analyst with Canaccord Genuity, in a July 14 report.

“We anticipate a record iPhone 6 upgrade cycle could lead to (a) better… chipset average selling price for Qualcomm, as we believe the iPhone 6 has adopted (the company’s) next-genreation modem versus the legacy modem in the current generation iPhones,” he wrote.

While we’ll see what happens later today, many analysts do think that the company is a good buy. It’s currently trading at $81 a share, but Sepenzis thinks it will hit $90 over the next 12 months. Walkley said the stock will climb to $95 over the next year.

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