By almost any way you could look at it, Qualcomm (QCOM) has had a pretty good run over the past year. The stock rallied from a low of $56.73 in March 2020 to a high of $167.14 in January. Earnings and revenue have seen huge jumps in recent quarters and the company’s profitability measurements are well above average. No wonder the stock gets a “strong buy” rating from Tickeron’s Artificial Intelligence Scorecard.

Qualcomm will look to keep the momentum going when it reports fiscal second-quarter results on April 28. The current consensus estimate is for earnings per share of $1.67 and that is nearly double the $0.88 the company earned in Q2 2020. Revenue is expected to come in at $7.62 billion and that’s up 46.4% from last year.

Those are some pretty lofty growth rates, but they are lower than the growth rates the company saw in Q1. EPS jumped by 119% in the first quarter while revenue jumped 62%. For 2021 as a whole earnings are expected to grow by 74.2% and revenue is expected to jump by 43.1%.

The growth rates from Q1, and the expected growth rates for Q2 and 2021, seem to mark a turning point for Qualcomm. The company had seen earnings grow by 7% per year over the last three years while revenue had grown at an annual rate of 3%.

In addition to the extremely high growth rates in earnings and revenue, Qualcomm’s profitability measurements are also among the best in the industry. The return on equity is incredibly high at 113.1% and the profit margin is above average at 25.2%.

The company also scores well with its Valuation rating. The trailing P/E is only 23.04 and the forward P/E is 20.67. Both of those readings are well below the industry averages. The only area where Qualcomm appears to be priced higher than the industry average is its price/book ratio. The ratio is at 20.74 currently and the average is only 5.01.

Despite Earnings Beat the Stock has Fallen

Qualcomm last reported earnings on February 3 and the company beat its EPS estimate on record earnings. The revenue figure missed estimates slightly. Since that earnings report, the stock has dropped approximately 15% and was down more than 25% at the lows a few weeks ago.

The stock did break out of an upwardly sloped trend channel after the earnings report and there have been a couple of downgrades from analyst. We see how the weekly stochastic indicators moved from overbought territory to oversold territory during the drop and they have since made a bullish crossover and moved out of oversold territory. The indicators hadn’t been in oversold territory since last March when the whole market was going through its meltdown.

The 10-week RSI dropped down below the 40 level on this recent pullback, but it never reached oversold territory. The RSI has only been below the 40 level on three occasions since the beginning of 2019.

Sentiment Shifting to a Less Bullish Stance

I mentioned that Qualcomm had been downgraded by a couple of analysts since the last earnings report and that is only one sentiment indicator that shows a shift away from a bullish posture. There are currently 29 analysts following the stock and 19 have the stock rated as a “buy”. There are nine “hold” ratings and there is one “sell” rating. Back in January, those ratings were 21/7/2, so it hasn’t been a huge shift, but it has been a shift never the less.

The short interest ratio has also been climbing in the last few months. The current reading is 2.34 and that is up from 1.17 in mid-February. The number of shares sold short jumped from 17.2 million to 22.2 million in a month and a half.

One sentiment indicator that hasn’t shifted to a less bullish stance is the put/call ratio. The ratio is currently at 0.908 with 285,300 puts open and 314,208 calls open. The ratio was at 0.94 back on February 3 when the last earnings report came out, so in the case of option traders they are slightly more bullish than they were. Of course, there are still a few weeks for option positions to build, so this particular indicator could see changes.

When we look at the overall picture for Qualcomm, the outlook is pretty solid. The company has posted strong earnings and revenue growth and it has a great ROE and an above-average profit margin. The current valuation measurements are low and very low compared to most of the industry.

On the technical side, the stock just went through a pretty significant drop and became oversold based on the weekly stochastic indicators. The indicators have since turned higher and it looks as though the stock is ready to start another move higher.

The sentiment isn’t overly bullish and we’ve seen a shift to a less bullish stance over the last few months. From a contrarian viewpoint, having investors and analysts become less bullish isn’t a bad thing. When investors and analysts are extremely bullish, it becomes hard for a company to impress investors enough to attract buyers. EPS estimates haven’t changed much over the last few months and that is probably a sign that analysts are content with their current estimates. When you see the estimates get ratcheted up it is usually a sign of rising optimism.

I look for Qualcomm to move higher in the next few quarters and can see the stock rallying by 30-40% during that span.