Qualcomm (QCOM ) , a multinational semiconductor and telecommunications equipment firm, saw its shares drop 4.5% on Thursday. The company has had problems closing a deal with NXP (NXP ) , a Dutch semiconductor company, forcing them to withdraw and refile a previously set merger application with Chinese authorities.
Qualcomm is currently awaiting approval from China, the last of the required global regulators, to move through with the merger.
Meanwhile, news of up to 1,500 layoffs as a means to save money has spawned doubt and rattled investors. Along with this, increased competition with Broadcam (AVGO ) , another chip manufacturing company, has shaken previous confidence in the company.
This announcement and subsequent drop on the day is sticking true to the trend for Qualcomm in recent months. Year to date, shares have dropped 20.7%, mostly as a result of this failed merger and its consequences.
Although the stock has steadily declined, it might still be attractive to some investors. But with “C” grades for Value and Growth in our Style Scores system, Qualcomm shares look shaky for a few reasons.
The company’s P/E of 16.5 and P/CF of 11.5 beat industry averages, but its P/B ratio of 3.4 is almost twice the average of its industry. In similar fashion, while the company has cash flow of $4.80 per share—almost four times the industry average—it also holds a debt-to-equity ratio of 0.8, which is a significant premium to the industry average. This discrepancy is what leads to Qualcomm’s average grade for Value.
And if potential investors were looking for strong analyst opinions, they would be met with disappointment. The Zacks Consensus Estimate for Qualcomm’s full-year earnings has moved just a penny higher over the past 60 days, while our consensus projection for its next fiscal year has actually moved a penny lower over that time.
Qualcomm has been struggling in the stock market since the start of this year. A gradual decline in the midst of merger complications, layoffs, and lack of public confidence has hurt the company over the past few months, especially today.
While there are some positive numbers that support respectable Value and Growth, they are counteracted by statistics that negate the same measures. Overall, mixed analyst sentiment has caused this stock to receive a Zacks Rank #3 (Hold).
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