What’s Next For Qualcomm Stock After 6% Fall Last Week?

by Trefis Team
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The stock price of Qualcomm Inc. (NASDAQ:QCOM) reached its 52-week high of $168 in early-2021, but has since dropped from that level. Further, the stock fell more than 6% in the past week, to levels of around $133 currently. However, Qualcomm reported strong Q3 2021 earnings in late-July (QCOM’s fiscal year ends in September), with revenue jumping to $8.06 billion, up from $4.89 billion in Q3 2020. This rise came primarily due to a rise in Handset chipsets (which rose from $2.46 billion to $3.86 billion) and Internet of Things (from $765 million to $1.4 billion) revenue. Further, as COGS and other operating expenses rose at a slower rate, operating income nearly tripled to $2.2 billion, up from $782 million for the same period last year. Despite a higher effective tax rate, EPS rose nearly 2.5x from $0.75 in Q3 ’20 to $1.80 in Q3 ’21. With more and more phones rolling out with 5G chipsets, we expect Qualcomm to continue seeing strong revenue and margin growth in the near to medium term.

However, after a 6% fall in a week, will Qualcomm stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for Qualcomm stock average just 1.5% in the next one-month (twenty-one trading days) period after experiencing a 6.4% drop over the previous week (five trading days).

But how would these numbers change if you are interested in holding Qualcomm stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Qualcomm stock expected return after a rise or fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF Qualcomm stock moved by -5% over five trading days, THEN over the next twenty-one trading days Qualcomm stock moves an average of 1.9%, with a decent 62% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Qualcomm Stock Movements:

Question 1: Is the average return for Qualcomm stock higher after a drop?

Answer: Consider two situations,

Case 1: Qualcomm stock drops by 5% or more in a week

Case 2: Qualcomm stock rises by 5% or more in a week

Is the average return for Qualcomm stock higher over the subsequent month after Case 1 or Case 2?

Qualcomm stock fares better after Case 1, with an average return of 1.9% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.6% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Qualcomm stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Qualcomm stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For Qualcomm stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Qualcomm after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Qualcomm stock by changing the inputs in the charts above.

 

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