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

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:


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,

Related Articles
  1. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  2. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  3. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  4. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  5. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  6. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  7. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  8. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  9. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  10. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  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 >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!