Smartphone growth may struggle to maintain its torrid pace, but there are still several compelling stock plays in the sector, including a clear-cut leader, writes Michael Comeau, contributor to Minyanville.com.

Taiwan’s HTC Corp. (HTCXF) gave smartphone bulls a scare on Monday after it said that revenues and shipments in the normally seasonably-strong fourth quarter would actually be lower than the third quarter.

But have no fear, chipmaker and mobile-device bellwether Qualcomm (QCOM) delivered a solid fiscal fourth-quarter earnings report and dynamite forward guidance yesterday, erasing concerns about a smartphone slowdown.

Here’s a recent daily chart:

chart

Click to Enlarge

Let’s have a look at the headline facts and figures:

  • Revenues rose 39% to $4.12 billion, surpassing the consensus of $4 billion
  • Earnings came in at $0.80 a share, beating analysts’ expectations by $0.02
  • For its fiscal first quarter (ending in December), Qualcomm expects to earn $0.86 to $0.92 a share versus consensus estimates of 85 cents
  • Revenues are expected to be in the range of $4.35 billion to $4.75 billion, nicely ahead of the $4.25-billion consensus
  • Fiscal 2012 earnings guidance is set at $3.42 to $3.62 a share, the midpoint of which is slightly ahead of expectations
  • Fiscal 2012 revenue guidance of $18 billion to $19 billion is well above Wall Street’s forecasts
  • Qualcomm is seeing serious momentum in 3G/4G smartphones, including Apple’s (AAPL) iPhone 4S
  • The company is seeing a mix/shift towards higher-end products like its Snapdragon chipset

The key here is that fiscal 2012 guidance. I’ve been a huge smartphone bull, and my money has been placed where my mouth is, given my holdings in Apple and Sandisk (SNDK).

Nonetheless, I’ve been a bit worried about the industry’s ability to sustain its blistering recent growth rates—nothing grows in the 70%-80% range forever.

The reality is that we have seen a bit of a slowdown in smartphone demand. The market research firm Canalys reported smartphone unit growth of 44% in the third quarter, down from 73% in the second quarter.

However, the aforementioned iPhone 4S—incidentally a key consumer of Qualcomm components—should boost fourth-quarter shipments nicely.

Plus, Qualcomm’s strong guidance should be reassuring to investors across the complex, which brings me to my favorite part of any earnings recap, which is…

Pin Action!

Obviously, Qualcomm’s big numbers should be considered very bullish for Apple and other smartphone plays like Silicon Motion (SIMO) and the aforementioned Sandisk. In particular, it could drive near-term upside in ARM Holdings (ARMH), though I’ll admit that I’m torn on that particular name.

One thing to keep in mind: Due to uncertainty following the death of famed former Apple CEO Steve Jobs, Qualcomm may actually be the best play on the fast-selling iPhone 4S though year-end.

By Michael Comeau, contributor, Minyanville.com

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
  9. Investing News

    How China's Economy is Now Like America's

    China's economy could take the global economy down with it; why that might be good news in the grand scheme.
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center