Qualcomm, Inc. (NASDAQ: QCOM, Stock Forum) was one of the few large-cap tech companies to put in a somewhat respectable performance in 2008, as the shares limited their losses to less than 9%. Meanwhile, hopes are riding high among investors for 2009, despite the slowdown in the economy. Wall Street analysts, in particular, have a soft spot for the security, dolling out a slew of "buy" ratings. But is the stock deserving of this optimism? Let's take a closer look.
Qualcomm pioneered the commercialization of the code-division multiple access (CDMA) technology used in wireless communications equipment and satellite ground stations mainly in North America. It licenses CDMA semiconductor technology and system software to more than 150 equipment and cell phone makers. Qualcomm's OmniTRACS satellite vehicle tracking system is used by the trucking industry to manage vehicle fleets. Meanwhile, Qualcomm Ventures invests in wireless communications and Internet startups.
Technically speaking, the shares of QCOM have staged an impressive rally from their November low of $28.16, resulting in a gain of more than 27%. The security has soared along the support of its 10-day and 20-day moving averages during this time period, and overcome resistance at its 10-week trendline. The next layer of resistance for the shares resides at the 37 level in the form of the equity's descending 20-week moving average.
Options traders are starting to pick up on this potential technical roadblock. Specifically, the International Securities Exchange and Chicago Board Options Exchange's 10-day put/call ratio of 0.71 ranks above 65% of all those taken during the past year. This preference for puts bought to open versus calls bought to open could be a sign of rising pessimism among the speculative options crowd.
Underscoring this negativity is the stock's Schaeffer's put/call open interest ratio. The current reading rests at 0.72, and is higher than 77% of all those taken during the past year. The ratio indicates that short-term options players have rarely been more bearishly aligned at any other time during the past year.
However, checking on the equity's front-month open interest configuration, we can still find a heavy accumulation of calls at the security's out-of-the-money strikes. The February 40 call is home to more than 14,000 contracts, while the February 42.50 call has open interest of nearly 11,000 contracts.
On the other hand, peak February put open interest resides at the 35 strike, with approximately 14,000 contracts. This preference for out-of-the-money calls over puts indicates that traders might be expecting big things out of the shares during the next couple of weeks.
Elsewhere, Wall Street is smitten with the security. Zacks reports that QCOM has been awarded 13 "buy" ratings and five "holds." What's more, Thomson Financial reports that the average 12-month price target for QCOM rests at $45.90 per share - a 27% premium to the stock's current trading range. Any downgrades or price-target cuts from this amorous group could pressure the equity lower.
Finally, traders should be aware that QCOM is slated to release its quarterly earnings report after the close on Thursday, Jan. 28. Analysts are currently looking for a profit of 39 cents per share for the current period, down from 47 cents per share reported last year. Historically, QCOM has matched these expectations twice and beaten them twice in the prior four reporting periods.
Overall, it appears that the stock has earned some of the bullish sentiment that the brokerage bunch has thrown its way. However, traders should be cautious of the security's 20-week trendline. A rejection here could result in a sharp pullback in the shares as the bulls take some profits off the table.