Tag Archives: QCOM

3 Wearable Stocks to Buy That Arent Apple Stock

Wearable technology is having a moment in the sun right now as more and more consumers opt to add smartwatches to their collection of gadgets. While tech behemoth Apple Inc. (NASDAQ:AAPL) and its Apple Watch have been touted as the top of the class in the wearable technology sector, it’s not the only good investment within the industry.

Microsoft Corporation (NASDAQ:MSFT), Garmin Ltd. (NASDAQ:GRMN) and QUALCOMM, Inc. (NASDAQ:QCOM) are three wearable stocks that investors should have on their radar as their own offerings look likely to propel the stocks into the future.

Apple is certainly not a bad pick, but it’s definitely not your only choice when it comes to investing in the future of wearable technology. 

Microsoft Corporation Is Heating Up in the Wearable Space Microsoft Replacing Surface Pro 4s in “Flickergate” Resolution Source: Mike Mozart Via Flickr

Microsoft stock is probably not the first investment you think of when it comes to playing the wearables trend. The company was unsuccessful with its own fitness tracker and eventually discontinued the Microsoft Band and admitted defeat.

However, it’s important to note that the smart watches seen on the streets today are only just the beginning and focusing solely on that one aspect of wearables would be extremely shortsighted.

As wearable tech gets more and more advanced, it’s application will stretch beyond just another cool gadget and Microsoft is looking to focus on that part of the wearable space.

The firm partnered with Trekstor to develop commercial wearables that will use cloud connectivity to increase productivity and streamline business activities. Microsoft says the devices could transform everything from inventory management to healthcare by replacing hand-held devices. 

So far we haven’t heard much about this project, but in the year to come I’d expect to see Microsoft capitalize on its strong position in the cloud computing space by offering a line of wearables that links on to Azure and further automate operations. 

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Garmin Isn’t Going Away Just Yet Source: Garmin

Garmin stock should be following the likes of Fitbit Inc. (NYSE:FIT) and GoPro Inc. (NASDAQ:GPRO) to the bottom of the barrel, but instead the company has emerged as close second to Apple when it comes to wearables.

Garmin has already weathered one storm, the decline of dedicated navigation systems and now the company has proven that it can stand up to competitors in the smartwatch space.

Garmin’s ability to keep focused on what consumers know and love about the company- GPS. When Garmin first came on the scene with consumer GPS devices, it was touted as innovative and bold, but now the company has paired back its innovation and instead makes useful devices for a niche group that are loyal to the brand.

That strategy has kept the company competitive in the wearables space and made the stock a good long-term bet, especially for income investors.

GRMN offers an impressive 3.58% dividend yield and boasts a relatively safe 65.38% payout ratio. That means investors can be confident that they’re going to see an income from their Garmin investment while also taking comfort in the fact that the firm knows what it takes to remain resilient in an ever-changing tech industry.

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Qualcomm Versus Apple Again Source: Qualcomm

Wearable tech makers aren’t the only ones with a horse in this race- it’s important to also consider chip makers like QCOM stock, whose processors power a significant chunk of the wearable market.

Qualcomm’s Snapdragon Wear processors can be found in all corners of the wearables market but most notably the company provides the chips for the majority of Android’s smartwatches. 

Not only is QCOM stock a good play in the wearables space, but the company is also trading relatively cheap at the moment because of worries about a trade war with China.

However, some of that pressure appears to be lifting, which has lead many to predict that QCOM has a pop coming in its future. 

Qualcomm was due to take over NXP Semiconductors (NASDAQ:NXPI), but Chinese regulators put their review of the deal on hold as trade tension with the US escalated. However, the review appears to be getting back underway. While that doesn’t guarantee that the deal will go ahead, it is a definite step in the right direction.

Over the next year QCOM stock is likely to see some turbulence as news about the NXP takeover plays out, but investors will be comforted by the company’s 4.46% dividend yield that should make up for some of that unease. 

As of this writing, Laura Hoy was long AAPL.

Fossil: Now Is The Time To Add

In 2017, Fossil (NASDAQ:FOSL) laid out an aggressive five-year strategic plan called “New World Fossil”, looking to transform the business to adjust to the changing dynamics of the traditional and connected watch business. The story was grim – Fossil was at risk of obsolescence, traditional watches sales fell off for many quarters, and the company’s ancillary products (leather and jewellery) suffered even more. The stock declined to $6 at one point.

A year later, Fossil has a new breath of life as smartwatches come to the fore, and showed that it is flexible and can transform into the new market! The stock is now $19.

This shows how emotional and short-term the market can be. The continuous slide of the share price spread the fear and affirmed investors that Fossil was deemed for failure. Chatter such as How many watches does a man need? Or Fossil is fossilising really showed how sceptical the market was with respect to the company. And madness is what it was with the share price. In the middle of this, we came out with a bold move at the beginning of the year and shared our opinion to buy in the stock. Now, at $19, we are adding more. The market likes stories, and the new story of Fossil is just starting to spread among investors.

The latest two earnings reports showed that the companys transformation plan – New World Fossil – is manifesting into tangible results. This quarters headline improvements were abundant and reflected in a huge change of sentiment in the market. So much so that even institutions are buying in.

And yes, we need to remind ourselves of the fact that as investors, we tend to seek affirmation from the market to confirm our findings. The share price reversion from $6 to now $19 tells investors that the New World Fossil strategic change is working thus far, but we are cognizant that it remains premature to judge precisely where this is going. However, Fossil is executing on the first leg of its turnaround.

Q1 Results

In the last conference call, the management laid out very conservative guidance, coupled with clear strategic goals. As a result, we factor in our reading that Fossil is attempting to underpromise and over-deliver. Regardless of how the company was before, we like this way forward.

Worthy mentions are:

Smartwatches shined again, posting growth of 97% yoy

We had the benefit of reading Fitbits (NYSE:FIT) earnings call a week before, and we would be lying if we didnt expect a good performance by smartwatches. Fitbits results and outlook on smartwatches were very assuring. Its smartwatches sales doubled on a sequential basis. Moreover, the company foresees an excellent product mix coming from its newly introduced smartwatches, and the health and wellness market is expanding rapidly.

Unsurprisingly to us, Fossils smartwatches performed well. The company delivered $80 million in sales for the quarter, 97% higher when compared to the first quarter of last year. The absolute sales percentage, 18% of total watches sales, is still small, but it was big enough to make yoy sales of watches to stabilise. Remember the double-digit declines just a few quarters before? 97% growth makes that seems so far back in the past!

Geographically, things are working better in Europe and Asia as opposed to the Americas.

(Source: Fossil’s 1Q18 8-K)

We are excited, and the analysts at the conference call were too. Nearly all questions were about the future of smartwatches.

Better yet, Fossil predicts the most dramatic improvement is going to be on fitness and health and wellness features that were already featured in a couple of SKUs last year in Q4. It is a step ahead of time. Additionally, it is always positive to learn that Google (GOOG, GOOGL) and Qualcomm (NASDAQ:QCOM) are significantly stepping up their investment in the category and the support of the ecosystem. Lastly, wearables last year was an $18 billion business, growing to $33 billion in three years. Fitbit is the number one in this category, but it is yet to produce positive FCF. Fossil has the scale and is still winning big contracts such as PUMA. Extrapolating the 5-6% of its traditional watch market share to smartwatches is an exciting prospect.

Marketing and sales channel wise, e-commerce outperformed wholesales

Ok, so it was impressive that Fossil achieved 5% improvement in SSS. However, it wasnt strictly “same stores sales”. This growth was mainly thanks to the companys inclusion of the direct e颅-commerce sales in its comp sales calculation – this channel alone increased almost 50% for the quarter. Nevertheless, it was very encouraging to read that direct sales channel (in-store) also performed well. In contrary, the wholesale segment in the US and Europe suffered due to the phasing out of the Adidas (OTCQX:ADDYY) and Burberry (OTCPK:BURBY) contract and the decline in sales in Skagen. The remaining brands: Michael Kors (NYSE:KORS), Emporio Armani, Armani Exchange, and Diesel were relatively flat. Thus, the decision to exit the wholesale business in the Europe leather segment was a welcoming move.

Digital marketing was the second strategic change that Fossil wanted to focus on, and we will be watching this closely. So far, it is executing exceptionally well.

Margins improved

Gross margin improved to 50.5%, highest in the past five quarters (4Q17: 48.66%, 3Q17: 46.45%, 2Q17: 50.49%, 1Q17: 49.76%). Q1 benefited from nearly $20 million of the New World Fossil cost tightening effort, which is projected to drive $200 million in gross margin and efficiency benefits through 2019.

The company had lower expenses in the first quarter resulting from corporate and regional infrastructure reductions, as well as lower store expenses, given 81 stores were closed since last year (the total now is 512 stores). Unfortunately, store closures will continue to hurt total direct channels sales; last quarter, this negatively impacted up to 300 basis points. All in all, we are encouraged, for as more unprofitable stores are closed, Fossil will become smaller but leaner.

Lastly, restructuring costs will continue to affect EPS. However, it will decrease as fewer stores are required to shut down.

Our reported loss of $0.99 per share included $0.35 of New World Fossil restructuring charges. Excluding these items, our adjusted EPS loss was $0.64. Last year, our first quarter EPS loss was $1 and included $0.35 impact from restructuring charges. EPS was relatively flat this year compared to last year despite the lower sales volume as we continue to deliver on our New World Fossil initiatives with improved gross margins and lower operating expenses.

– Source: Fossil 1Q18 Earnings Call

EBITDA and FCF

For 2018, Fossil expects adjusted EBITDA in the range of $175-225 million and will invest approximately $25 million in capital expenditures. Coupled with interest expense of $50 million, Fossils FCF will range from $100 million to $150 million. These are fantastic numbers for a company that was supposedly struggling just a few quarters earlier.

Company management expects to see better years ahead:

As we said in our last call, our longer颅-term view is that after top颅line contraction in 2018, our initiatives should begin to stabilize sales levels in 2019 with sales growth returning in 2020 and continuing to grow annually thereafter. And with our New World Fossil transformation initiatives, we are targeting a double-颅digit operating margin over the long term.

– Source: Fossil 1Q18 Earnings Call

Financial Health

Fossils debt is at $463 million, reduced from $616 million a year ago. Cash is at $230 million, compared to $320 million last year. However, interest payment is higher by $2 million yoy due to the recent refinancing.

Overall, with trailing 12颅-month adjusted EBITDA of $204 million. Fossils first-quarter leverage ratio was 2.3 times, well within its 4.5 times bank leverage ratio covenant limits. The company is in no hurry to pay off its debts, but given the $230 million pile of cash and conservatively $100 million FCF, all debts could be paid off within two years.

Takeaway

Fossil’s 1Q18 results were very progressive in the essential areas, though dampened with a few misses in the wholesales channel, the American market and further restructuring costs expected. However, it was enough to change the sentiment of the market from the demise of traditional watches to the growth of wearables! The current product mix of 18% is expected to rise to 25%, 30% and then 35%.

With forward EBITDA of $175-225 million and FCF in the $100-150 million range, managements convincing story is well-supported! The strategic transformation to shift the company from owning 5-6% of the world’s traditional watches to owning the same percentage in the hybrid and smartwatches segments is well underway.

Fossil is a still buy from here.

__

If Fossil is not for you, we cover value stocks, so maybe try a diversified rail stock (L.B. Foster (NASDAQ:FSTR)), a beaten-down health retailer (GNC Holdings (NYSE:GNC)), or a pure online car parts play (U.S. Auto Parts Network (NASDAQ:PRTS)).

Author’s note: Thank you for reading the article. If you have enjoyed our article, please click “Follow” to receive our stock picks as soon as they are published. Lastly, please do further due diligence to reach your own conclusions.

Disclosure: I am/we are long FOSL, GNC, PRTS, FSTR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Fossil: Now Is The Time To Add

In 2017, Fossil (NASDAQ:FOSL) laid out an aggressive five-year strategic plan called “New World Fossil”, looking to transform the business to adjust to the changing dynamics of the traditional and connected watch business. The story was grim – Fossil was at risk of obsolescence, traditional watches sales fell off for many quarters, and the company’s ancillary products (leather and jewellery) suffered even more. The stock declined to $6 at one point.

A year later, Fossil has a new breath of life as smartwatches come to the fore, and showed that it is flexible and can transform into the new market! The stock is now $19.

This shows how emotional and short-term the market can be. The continuous slide of the share price spread the fear and affirmed investors that Fossil was deemed for failure. Chatter such as How many watches does a man need? Or Fossil is fossilising really showed how sceptical the market was with respect to the company. And madness is what it was with the share price. In the middle of this, we came out with a bold move at the beginning of the year and shared our opinion to buy in the stock. Now, at $19, we are adding more. The market likes stories, and the new story of Fossil is just starting to spread among investors.

The latest two earnings reports showed that the companys transformation plan – New World Fossil – is manifesting into tangible results. This quarters headline improvements were abundant and reflected in a huge change of sentiment in the market. So much so that even institutions are buying in.

And yes, we need to remind ourselves of the fact that as investors, we tend to seek affirmation from the market to confirm our findings. The share price reversion from $6 to now $19 tells investors that the New World Fossil strategic change is working thus far, but we are cognizant that it remains premature to judge precisely where this is going. However, Fossil is executing on the first leg of its turnaround.

Q1 Results

In the last conference call, the management laid out very conservative guidance, coupled with clear strategic goals. As a result, we factor in our reading that Fossil is attempting to underpromise and over-deliver. Regardless of how the company was before, we like this way forward.

Worthy mentions are:

Smartwatches shined again, posting growth of 97% yoy

We had the benefit of reading Fitbits (NYSE:FIT) earnings call a week before, and we would be lying if we didnt expect a good performance by smartwatches. Fitbits results and outlook on smartwatches were very assuring. Its smartwatches sales doubled on a sequential basis. Moreover, the company foresees an excellent product mix coming from its newly introduced smartwatches, and the health and wellness market is expanding rapidly.

Unsurprisingly to us, Fossils smartwatches performed well. The company delivered $80 million in sales for the quarter, 97% higher when compared to the first quarter of last year. The absolute sales percentage, 18% of total watches sales, is still small, but it was big enough to make yoy sales of watches to stabilise. Remember the double-digit declines just a few quarters before? 97% growth makes that seems so far back in the past!

Geographically, things are working better in Europe and Asia as opposed to the Americas.

(Source: Fossil’s 1Q18 8-K)

We are excited, and the analysts at the conference call were too. Nearly all questions were about the future of smartwatches.

Better yet, Fossil predicts the most dramatic improvement is going to be on fitness and health and wellness features that were already featured in a couple of SKUs last year in Q4. It is a step ahead of time. Additionally, it is always positive to learn that Google (GOOG, GOOGL) and Qualcomm (NASDAQ:QCOM) are significantly stepping up their investment in the category and the support of the ecosystem. Lastly, wearables last year was an $18 billion business, growing to $33 billion in three years. Fitbit is the number one in this category, but it is yet to produce positive FCF. Fossil has the scale and is still winning big contracts such as PUMA. Extrapolating the 5-6% of its traditional watch market share to smartwatches is an exciting prospect.

Marketing and sales channel wise, e-commerce outperformed wholesales

Ok, so it was impressive that Fossil achieved 5% improvement in SSS. However, it wasnt strictly “same stores sales”. This growth was mainly thanks to the companys inclusion of the direct e颅-commerce sales in its comp sales calculation – this channel alone increased almost 50% for the quarter. Nevertheless, it was very encouraging to read that direct sales channel (in-store) also performed well. In contrary, the wholesale segment in the US and Europe suffered due to the phasing out of the Adidas (OTCQX:ADDYY) and Burberry (OTCPK:BURBY) contract and the decline in sales in Skagen. The remaining brands: Michael Kors (NYSE:KORS), Emporio Armani, Armani Exchange, and Diesel were relatively flat. Thus, the decision to exit the wholesale business in the Europe leather segment was a welcoming move.

Digital marketing was the second strategic change that Fossil wanted to focus on, and we will be watching this closely. So far, it is executing exceptionally well.

Margins improved

Gross margin improved to 50.5%, highest in the past five quarters (4Q17: 48.66%, 3Q17: 46.45%, 2Q17: 50.49%, 1Q17: 49.76%). Q1 benefited from nearly $20 million of the New World Fossil cost tightening effort, which is projected to drive $200 million in gross margin and efficiency benefits through 2019.

The company had lower expenses in the first quarter resulting from corporate and regional infrastructure reductions, as well as lower store expenses, given 81 stores were closed since last year (the total now is 512 stores). Unfortunately, store closures will continue to hurt total direct channels sales; last quarter, this negatively impacted up to 300 basis points. All in all, we are encouraged, for as more unprofitable stores are closed, Fossil will become smaller but leaner.

Lastly, restructuring costs will continue to affect EPS. However, it will decrease as fewer stores are required to shut down.

Our reported loss of $0.99 per share included $0.35 of New World Fossil restructuring charges. Excluding these items, our adjusted EPS loss was $0.64. Last year, our first quarter EPS loss was $1 and included $0.35 impact from restructuring charges. EPS was relatively flat this year compared to last year despite the lower sales volume as we continue to deliver on our New World Fossil initiatives with improved gross margins and lower operating expenses.

– Source: Fossil 1Q18 Earnings Call

EBITDA and FCF

For 2018, Fossil expects adjusted EBITDA in the range of $175-225 million and will invest approximately $25 million in capital expenditures. Coupled with interest expense of $50 million, Fossils FCF will range from $100 million to $150 million. These are fantastic numbers for a company that was supposedly struggling just a few quarters earlier.

Company management expects to see better years ahead:

As we said in our last call, our longer颅-term view is that after top颅line contraction in 2018, our initiatives should begin to stabilize sales levels in 2019 with sales growth returning in 2020 and continuing to grow annually thereafter. And with our New World Fossil transformation initiatives, we are targeting a double-颅digit operating margin over the long term.

– Source: Fossil 1Q18 Earnings Call

Financial Health

Fossils debt is at $463 million, reduced from $616 million a year ago. Cash is at $230 million, compared to $320 million last year. However, interest payment is higher by $2 million yoy due to the recent refinancing.

Overall, with trailing 12颅-month adjusted EBITDA of $204 million. Fossils first-quarter leverage ratio was 2.3 times, well within its 4.5 times bank leverage ratio covenant limits. The company is in no hurry to pay off its debts, but given the $230 million pile of cash and conservatively $100 million FCF, all debts could be paid off within two years.

Takeaway

Fossil’s 1Q18 results were very progressive in the essential areas, though dampened with a few misses in the wholesales channel, the American market and further restructuring costs expected. However, it was enough to change the sentiment of the market from the demise of traditional watches to the growth of wearables! The current product mix of 18% is expected to rise to 25%, 30% and then 35%.

With forward EBITDA of $175-225 million and FCF in the $100-150 million range, managements convincing story is well-supported! The strategic transformation to shift the company from owning 5-6% of the world’s traditional watches to owning the same percentage in the hybrid and smartwatches segments is well underway.

Fossil is a still buy from here.

__

If Fossil is not for you, we cover value stocks, so maybe try a diversified rail stock (L.B. Foster (NASDAQ:FSTR)), a beaten-down health retailer (GNC Holdings (NYSE:GNC)), or a pure online car parts play (U.S. Auto Parts Network (NASDAQ:PRTS)).

Author’s note: Thank you for reading the article. If you have enjoyed our article, please click “Follow” to receive our stock picks as soon as they are published. Lastly, please do further due diligence to reach your own conclusions.

Disclosure: I am/we are long FOSL, GNC, PRTS, FSTR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Why NXP Semiconductors Stock Is Soaring Today

NXP Semiconductors NV (NASDAQ:NXPI) stock was flying high Monday on news of possible relaxing trade restrictions between the U.S and China.

Why NXP Semiconductors Stock Is Soaring TodaySource: Karlis Dambrans via Flickr

The increase to NXPI stock comes after President Donald Trump made a statement about getting smartphone maker ZTE up and running again. There is a ban on trades with the company due to violations.

Trade talks between the two countries are expected to proceed and may result in a better relationship. This includes opening the way for NXP Semiconductors to be acquired by Qualcomm, Inc. (NASDAQ:QCOM).

Qualcomm, Inc. and NXP Semiconductors NV first entered into an agreement back in 2016 for QCOM to acquire all outstanding shares of NXPI stock. However, Chinese regulators stepped in to stop the deal. Now China is looking into the matter again.

The deal between the two companies has Qualcomm, Inc. offering to buy NXP Semiconductors NV for $4.40 billion. While the deal hasn’t been able to be completed on time, the two companies haven’t given up just yet.

Qualcomm, Inc. announced last Friday that it was extending its tender offer for all outstanding shares of NXPI stock to May 25, 2018. This isn’t the first extension the company has made to the offer and won’t likely be the last. Either way, this and the recent China trade news still gives investors hope that QCOM will be able to complete its acquisition of NXP Semiconductors NV.

NXPI stock was up 13% and QCOM stock was up 2% as of Monday afternoon.

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

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Trade Restrictions Continue to Haunt Telecom Stocks

Over the last five trading days, telecom stocks flattered to deceive as the initial upturn was replaced by a sustained downturn on concerns over the implications of the fresh restrictions issued by the U.S. government against Chinese telecom companies.

Trade Restrictions Continue to Haunt Telecom StocksSource: Shutterstock

Last week, Treasury Secretary Steven Mnuchin led a delegation of U.S. officials in China to defuse the tensions between the two warring countries while Liu He, the top economic adviser of President Xi Jinping, headed the Chinese side in the talks. The Chinese officials made solemn representations to the visiting delegates to convey the plight of ZTE that invited most of the wrath of the Trump administration.

ZTE also formally appealed to the U.S. Commerce Department’s Bureau of Industry and Security to suspend the seven-year ban on its products that threatened its survival and crippled operations.

Regarding company-specific news, earnings of some telecom companies along with improved product launches for superior connectivity and high-quality content to subscribers at lower cost of ownership, and acquisitions topped the charts. The industry’s earnings in general appear to be on strong footing backed by healthy growth dynamics thanks to the existing secular trends in cloud computing, artificial intelligence and Big Data.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Motorola Solutions Inc (MSI)

Motorola Solutions Inc (NYSE:MSI) reported strong first-quarter 2018 results on the back of healthy growth across all geographic regions. Non-GAAP earnings for the reported quarter were $1.10 per share compared with 71 cents in the year-ago quarter, primarily driven by top-line growth. The bottom line exceeded the Zacks Consensus Estimate of 86 cents.

Net sales in the reported quarter came in at $1,468 million compared with $1,281 million in the year-ago quarter, driven by organic growth of 10% and healthy performance across all regions. Quarterly sales exceeded the Zacks Consensus Estimate of $1,371 million.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Sprint Corp (S)

Sprint Corp (NYSE:S) reported healthy fourth-quarter fiscal 2017 results, wherein both the top line and the bottom line surpassed the Zacks Consensus Estimate. The U.S. national wireless carrier delivered record financial results with highest ever net income and operating income in fiscal 2017.

Net income for the reported quarter improved to $69 million from a net loss of $283 million in the year-ago quarter, supported by lower operating expenses and income tax benefit. Earnings per share for the reported quarter came in at 2 cents against a loss of 7 cents in the previous-year quarter. The bottom line surpassed the Zacks Consensus Estimate of a loss of 6 cents.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Windstream Holdings Inc (WIN)

Windstream Holdings Inc (NASDAQ:WIN) reported tepid first-quarter 2018 financial results, wherein both the top line and the bottom line missed the respective Zacks Consensus Estimate. However, both the figures improved on a year-over-year basis.

For the reported quarter, the company incurred a net loss of $121.4 million or a loss of 65 cents per share compared with a net loss of $111.3 million or a loss of 89 cents per share in the year-ago quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 59 cents. Total revenues increased 6% year over year to $1,454.3 million but missed the Zacks Consensus Estimate of $1,464 million.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Nokia Oyj (NOK)

Nokia Oyj (NYSE:NOK) inked a deal to acquire SpaceTime Insight, a California-based IoT startup, for an undisclosed amount. The deal is aimed at expanding Nokia’s IoT portfolio and IoT analytics capabilities while expediting the development of new IoT applications for key vertical markets.

The buyout supports Nokia’s software strategy and leverages SpaceTime’s sales expertise and proven track record in IoT application development, machine learning and data science to augment the efficacy of the Nokia Software IoT product unit.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Qualcomm, Inc. (QCOM)

According to a Bloomberg report, Qualcomm, Inc. (NASDAQ:QCOM) is mulling to exit the market for production of high-end processors for data-center servers in order to focus on its core businesses. While the endeavor would help the company save millions of dollars through reduced R&D expenses, it would also increase its dependence on slow-growing market for mobile-phone chips.

Moreover, aggressive competition in the mobile phone chipset market is likely to hurt profits in the future. Although the global smartphone market is expected to maintain its momentum in the next four to five years, a major part of this growth is likely to come from low-cost emerging markets, which is likely to exert pressure on margins.

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Price Performance

The following table shows the price movement of some the major telecom stocks over the past week and during the last six months.

In the last five trading days, Harris Corporation (NYSE:HRS) was the major gainer with its share price rising 5.6% while Verizon Communications Inc. (NYSE:VZ) was the major decliner, with its stock losing 3%.

Trade Restrictions Continue to Haunt Telecom Stocks

Over the last six months, Motorola was the best performer with its stock appreciating 13.6% while Qualcomm was the major decliner with its shares falling 25.1%.

Over the last six months, the Zacks Telecommunications Services industry underperformed the benchmark S&P 500 index with an average decline of 4.1% against a gain of 4.3% for the latter.

Trade Restrictions Continue to Haunt Telecom Stocks

What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to the latest developments in the trade war and how the U.S. administration responds to the ZTE plea.

Wall Street’s Next Amazon

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A Beat Can’t Keep Qualcomm Inc. Strongly Over $50

Despite handily beating earnings estimates, Qualcomm, Inc. (NASDAQ:QCOM) could not slay the bears stalking its stock.

Qualcomm stock Source: Karlis Dambrans via Flickr

The company said it earned $1.2 billion, 80 cents per share, on revenues of $5.2 billion for the quarter, easily beating a “whisper number” of 63 cents. But the shares rose just five cents in overnight trading and were due to open at $49.80 each, down almost 25% so far in 2018. It then waffled around the $50 point for most of the day.

The opening price is close to the company’s low of September 9, which came after a judge ruled that Apple Inc. (NASDAQ:AAPL) lawsuits against it could proceed.  The two companies have been at legal war since early 2017, with Apple protesting Qualcomm’s royalties for using its patents.

The conflict eventually brought in an unsolicited bid from Broadcom Inc. (NASDAQ:AVGO) which Qualcomm survived only after the Administration blocked it, fearing a leakage of technology to China.

Where Do We Go from Here?

Qualcomm has been fighting for its monopoly rights over cellphone tech for three years now. It beat back efforts to cut royalties from China, and eventually settled with Samsung Electronics (OTCMKTS:SSNLF), which complained the chips ran too hot.

The disputes take many forms, but they all amount to the same thing. Rival chipmakers want a piece of Qualcomm’s market, and Qualcomm is fighting them in court with patents that are necessary to produce the chips.

Since these disputes began in 2015, Qualcomm stock has bounced between about $50 per share and about $80 per share. The latest fall is based on analysts concerns Apple will switch to its own and Intel Corp. (NASDAQ:INTC) chips in the iPhone, that Samsung is moving to its own homegrown processors, and that China’s Huawei will power phones made there.

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Qualcomm’s own outlook is that China will come around, but that the dispute with Apple is unlikely to end soon, meaning years of royalties it claims Apple owes won’t be hitting its books. The company also could not say when its planned acquisition of NXP Semiconductors NV (NASDAQ:NXPI) might be completed. Chinese regulators have yet to approve it, and the deal may yet become a victim in the growing trade conflict between China and the U.S.

Could Mollenkopf Leave?

CEO Steve Mollenkopf, who took his present position in 2014 after it was rumored he might take the job at  Microsoft Corporation (NASDAQ:MSFT) that eventually went to Satya Nadella, has been taking heat for his hardline position, and predecessor Paul Jacobs left the board recently after reports emerged he was trying to take the company private along with Softbank Group Corp. (OTCMKTS:SFTBY).

Even if Mollenkopf were replaced, and the Apple dispute were settled, however, it would provide only a short-term fix for Qualcomm’s troubles.

As mobile phones have become the center of personal technology during this decade, what they contain and how they work has become an intense, global political issue, not just a business one.

It’s not about speeds and feeds anymore. It’s about control. It’s about control over the market, control over the price of the device, and control over the underlying technology on which the global economy rides.

Still, a Bargain?

In this environment, Qualcomm’s demands for its “intellectual property rights” are trumped by global politics. With its market cap of under $74 billion, it’s a minnow in a sea of sharks.

At the present price, however, it’s one of the world’s great bargains. It sells for less than four times annual revenue. The dividend rate of 62 cents per share, easily sustained by current earnings, represents a yield of almost 5%, and the possibility of a profitable buyout, or an end to the Apple dispute, makes it very tempting at its current price.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owne

Here’s the Main Reason Microsoft Corporation Stock Is a Safe Haven

While many names recently have been pummeled, Microsoft Corporation (NASDAQ:MSFT) has been surprisingly defensive. Does that make Microsoft stock a buy or is it only a matter of time before it gets hit too?

From its highs, Microsoft stock is off about 7.2%. That’s actually better than the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) (down 10.2%) and actually pretty solid when you consider how far the FANG stocks have fallen from their highs. Consider:

Facebook Inc (NASDAQ:FB) -19%

Amazon.com, Inc. (NASDAQ:AMZN) -12%

Netflix, Inc. (NASDAQ:NFLX) -13%

Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) -15.5%

Best House in a Bad Neighborhood

Not that I’d consider FANG a “bad neighborhood” necessarily. But when considering the group’s recent performance, Microsoft’s 7% fall doesn’t look all that bad.

For one, it not being a part of the FANG group helps, as AMZN has been picked on by President Trump and FB’s been dumped ( although surprisingly not as hard as Twitter Inc (NYSE:TWTR) and Snap Inc (NYSE:SNAP)) because of its user data issue.

Microsoft doesn’t really have any bad laundry to air.

Think about it vs. its peers. Alibaba is one cloud alternative, but its shares have been under pressure as China and the U.S. engage in an escalating trade war. Microsoft’s biggest cloud competitors in the U.S. are AMZN and GOOGL. As we noted, the former’s been hit by Trump comments, while the latter’s caught up in FANG selling.

salesforce.com, inc (NASDAQ:CRM) is another alternative, down about 10% from its highs. But it’s in the midst of digesting a recent $6.5 billion acquisition of Mulesoft Inc (NYSE:MULE). While Microsoft may have a lower growth rate than CRM, it’s also got a much more attractive valuation. In this type of market, that’s a good sticking point.

You could make a case for other big tech, like Intel Corporation (NASDAQ:INTC), Cisco Systems, Inc. (NASDAQ:CSCO) or Qualcomm, Inc (NASDAQ:QCOM). But Microsoft stock has so far outperformed these names and has better growth prospects.

Who does that leave? Apple Inc. (NASDAQ:AAPL) is one choice, as it has a low valuation, solid growth and will return plenty of capital this year. Along with Microsoft stock, Apple could be a solid option for investors. For the record, it’s down about 8% from its highs, roughly in-line with Microsoft stock.

Valuing Microsoft Stock

Analysts are looking for revenue growth of 11% in 2018 and 8.6% growth in 2019. On the earnings front, estimates call for 11% growth this year and another 7.5% growth next year.

However, I’d be willing to bet the company can beat these estimates. Over the last 10 quarters (two and a half years!) Microsoft has missed revenue estimates just once and hasn’t missed an earnings estimate. That’s pretty darn dependable.

In any regard, we’re paying just 24 times this year’s earnings estimates for a best-in-breed technology stock. Microsoft has a rock-solid balance sheet, pays out a ~2% dividend yield and is sealing its position in the cloud-computing market. Further, it’s laying the groundwork for artificial intelligence and recently announced a $5 billion investment in the Internet of Things market.

The bottom line? CEO Satya Nadella has MSFT moving in the right direction.

Trading Microsoft Stock

On the chart below, you’ll see two trend-lines, one in black and the other in purple. Should black trend-line support give way, it opens up the possibility that MSFT stock has further to fall.

chart of Microsoft stock price
Click to Enlarge

Specifically, a decline into the mid- to low-$80s is possible. Microsoft consolidated in this range through November after a strong earnings result boosted the stock higher. Should the QQQ remain under pressure though, it’s likely that current trend-line support (black) and the 100-day moving average will give way, even though MSFT is a solid name to own in this stressed out market.

If that’s the case, I’d look for a retest of the 200-day moving average. Should the QQQ get some relief, look for Microsoft stock to approach its previous highs.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a position in GOOGL, CRM and AAPL. 

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