Qualcomm Inc (NASDAQ: QCOM) stock was rising nicely yesterday in anticipation of the Q1 earnings release. The Qualcomm stock price was up 6.25% on the day in fact, up to market close. But then came the actual earnings release itself, after market close, and the stock has declined 3.5% (at pixel time, near to 4%) since those Q1 results.
This looks a little odd because the earnings themselves were a good beat of expectations. Revenues at $10.7 billion is a $270 million beat, non-GAAP EPS of $3.23 is a 23 cent beat as well. Revenues up, earnings up, what’s not to like at Qualcomm?
So, why has the stock fallen since the announcement? The probable cause is simply the rise before the earnings release.
There is no other news out there concerning Qualcomm which should have this sort of effect on the stock price after all. Yes, OK, Meta and PayPal announced bad results and dropped 20% and more each but that’s an entirely different part of the tech world. Also, there were specific reasons for both, this isn’t a general tech market decline.
There’s not been any solution to hte general chip shortage going on currently. 5G hasn’t stopped being rolled out – whatever the shouting about airports and jetplanes being affected. There just isn’t anything else that should be influencing the Qualcomm stock price other than thiese Q1 results that is.
So, the Q1 results are a good, solid, earning beat and yet the stock declines? Why? The answer almost certainly being the rise before the earnings were announced.
Look at what the nett position is over the past 24 hours. Qualcomm stock is still up a couple of percent on the day. And perhaps more importantly it’s been obvious for weeks, if not months, that we’d expect results to be good here. Qualcomm’s up a solid 10% in the last 5 days, 25% or so up over the past 6 months. The chip shortage, 5G rollout, the general market conditions, they’ve all been known about for some time now.
So, given that markets are forward looking the stock price has been rising in advance of the formal declaration of Qualcomm earnings. Expectations and forecasts have been rising as well – don't forget an “earnings beat” isn’t better results than last time, it’s better results than analysts believe will happen this time.
So, perhaps that’s our answer for the Qualcomm stock price despite the earnings beat. Which is that the price rose in advance of the good results, as some to many expected them to be better than the analyst average. When they arrived, those results, they were indeed good but not as good as some had expected, so the drop.
Another way to put this is that old stock market adage – buy the rumour, sell the facts. The talk that Qualcomm’s results would be good pushed the stock price up, the reality removed some of the wilder hopes.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.