This Stock Seems Destined For Greatness
Piyush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If the “Death of the PC” is here, it would be mainly because mobile devices are powerful enough to replace the big old desktop PCs. I’m not a gamer by any means, and going for a 3 Ghz+ dual/quad processor makes no sense to me. To cater to the growing need of low powered, light weight, and yet powerful devices, both Intel (NASDAQ: INTC) and AMD (NYSE: AMD) released Ivybridge and Trinity processors, respectively. Intel is due to release its new line up of Haswell processors next year, which is expected to deliver twice the performance of the Ivybridge series, while consuming nearly 60% less power.
However, when we talk about mobile devices one should note that the smartphone segment offers greater growth potential compared to the already mature laptop/desktop segments. Smartphones have taken over the world, and some reports expect the segment’s annual growth to be around 20% until 2015. In order to take advantage of this tremendous growth potential, Intel recently launched its “Medfield” processor, which brings it into direct competition with Qualcomm’s (NASDAQ: QCOM) Snapdragon S4 and NVidia’s Tegra 3 processors. However Medfield processors lack 4G LTE support, which hinders it from going mainstream.
Qualcomm launched its range of Snapdragon S4 processors equipped with AMD’s mobile radeon graphics earlier this year. Though its adoption is still in progress, benchmarks reveal that high-end Snapdragon S4 processors beat NVidia’s (NASDAQ: NVDA) Tegra 3 in terms of graphical performance by a significant margin.
Below are the benchmarks.
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From the benchmarks, it seems that the market for high end gaming processors, at least performance-wise, undeniably belongs to Qualcomm.
Nokia’s flagship Lumia series will also boast Qualcomm’s Snapdragon S4 pro processors. LG also announced that its Optimus G will come with Snapdragon S4 Pro (quad core) processors. Qualcomm had previously made headlines when it came equipped in Apple’s iPhone 5. Though Apple's stock has been sliding, Qualcomm's shares seem to be gaining upside momentum. Many believe that Qualcomm could be the best way to play smartphone growth, as it looks well equipped to beat the market competition.
On the back of strong smartphone sales, Qualcomm reported total quarterly revenues of $4.87 billion, up 18.3% from the last year’s quarter. Quarterly net income stood at $1.24 billion, up from $1.055 last year. Total CDMA-based MSM chipset shipments rose 11% over the same period, quarterly gross margin stood at 62.2%, and quarterly operating margin was 25.4%. The management of the company expects annual revenues to be $23-$24 billion and earnings around $4.12-$4.32 per share. Overall the results beat the Street’s estimates, with only margins witnessing a fall.
Though smartphone manufacturer’s had a weaker quarter, Qualcomm reported stellar financial results. In my opinion, this run will continue as the demand for smartphones is increasing at a rapid rate, especially in India and China.
The adoption of Qualcomm’s S4 is still in progress. The company is set to release Snapdragon S4 "Prime" processors in 2013. Though its GPU would be Adreno 320, the clock of the quad core processor would be stepped up from the current 1.7 GHz to 2.5 GHz.
NVidia is due to release its Tegra 4 processors in 2013, which would boast of a maximum clock of 2 Ghz, which is still lower than S4 Prime’s 2.5Ghz. In my opinion, Qualcomm is a great stock to hold, not because my smartphone also has a Snapdragon S4 chip, but because of its growth prospects.
PiyushArora has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Intel, and Qualcomm. Motley Fool newsletter services recommend Apple, Intel, and NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!