Tech Letter Archives

Should Investors Buy Qualcomm Stock After the Dip?

What’s the one-sentence answer to why you should buy chip company QUALCOMM Incorporated (QCOM)?

The simultaneous global adoption of 5G, combined with increasingly complex technical requirements and an accelerating pace of change drives a significant multiyear industry transition that directly offers QCOM more revenue opportunities.

The numbers are showing up big time with record first-quarter revenues of $8.2 billion, up 63% year over year, and record earnings of $2.17 per share, more than doubling from the prior year.

In fact, Qualcomm is being held back by supply constraints - business is that good.

RF or better known as mobile antennas, demonstrated continued growth with quarterly revenues more than doubling year over year and crossing the $1 billion threshold, a significant milestone.

QCOM is executing a masterful digital strategy to address many of the technical challenges of delivering a true modem to antenna 5G experience and capture a higher dollar share of content in smartphones.

The automotive revenues of $212 million were up 44% year over year, and QCOM’s design win pipeline has grown to $8.3 billion from just $3 billion three years ago, placing QCOM on a trajectory to achieve its fiscal-year 2024 revenue target of $1.5 billion.

Internet of Things (IoT) vertical also passed the $1 billion threshold in Q1 and grew 48% year over year, driven by the growth of QCOM’s core technologies for the digitization of consumer, networking, and industrial applications.

The rapid deployment of 5G in both the core handset industry is something that QCOM has planned to take advantage of for years.

In QCOM’s licensing business, their broad portfolio of foundational system-level innovations and intellectual properties across 3G, 4G, and 5G, along with valuable implementation patents is unmatched and recognized in part by having signed more than 120 5G license agreements, up from 111 license agreements last quarter.

Qualcomm has also spent the past decade knee-deep in AI research and development, resulting in the creation of the technology necessary to scale AI across industries and products from smartphones and automotive to the IoT and data centers.

To create a world full of artificial intelligence, QCOM focused on making efficient hardware, algorithmic advancements, and software tools available to developers and original equipment manufacturer (OEM).

The car is somewhere where QCOM can make some serious inroads as the industry continues to grow rapidly.

The undeniable trend is that the car is becoming more connected, more autonomous, and more electric.

A demand for 5G connectivity, and new experiences and user demands such as always-connected digital cabins for infotainment, real-time navigation, and entertainment are becoming the new standard.

This “iPad on wheels” will ultimately be powered by 4G LTE and 5G connected services with integrated cellular V2x, Wifi, Bluetooth, and precise positioning technologies, QCOM’s 4G and 5G platforms are designed to securely connect vehicles to the cloud, each other, and the surrounding environment.

Qualcomm already has 200 million vehicles on the road today connected with QCOM modems, and nobody produces modems better than them.

QCOM currently has a third-generation automotive cockpit solution that has been selected by 20 of the top 25 automakers.

This shows QCOM’s achievements in high-performance computer vision, artificial intelligence, and multi-sensor processing.

IoT products have been a hit with the launch of QCOM’s second-generation Snapdragon HCX, and the introduction of QCOM’s commercial and educational platforms for both Windows and Chrome, and continued ecosystem progress.

With over 40 design wins and strong ecosystem momentum with global operator partnerships, QCOM is flexing the IoT division with the RF division to continue on its path of stand-out revenue drivers for the foreseeable future.

Sadly, investors focused on the supply constraints “across the entire industry” as a reason to dump the stock in the short-term, but I do believe this is a great buy and hold chip stock.

This will be a technical issue and not a long-term structural overhang that could potentially kill the trajectory of the underlying stock.

I am bullish QCOM.

February 5, 2021 - Quote of the Day

Tech Letter

“A.I. is probably the most important thing humanity has ever worked on.” – Said Alphabet CEO Sundar Pichai

February 3, 2021

Tech Letter

Mad Hedge Technology Letter
February 3, 2021
Fiat Lux

Featured Trade:

($4,000 A DONE DEAL FOR AMAZON IN 2021)
(AMZN)

$4,000 a Done Deal for Amazon for 2021

Tech Letter

Amazon is highly likely to surge past $4,000 this year.

Like many other tech stocks, last March was a kick in the teeth that served up a quick correction.

But unlike a handful of sectors, investors saw their faith in Amazon rewarded when the stock reversed and roared to $3,500.

After a sharp spiral down off the March lows, as investors saw Amazon as a beneficiary of lockdown measures, the stock had been consolidating within a narrowing range over the past several months.

Traders have solid support levels at $3,100 and any trader should be buying AMZN at anything close to that.

The price action suggests that AMZN has a favorable chance to break up to the upside some point after what was a blowout fourth quarter results of net income of decisively more than the predicted $6.3 billion and revenue approaching $120 billion.

They outdid themselves and reported earnings of $14.09 per share on record revenue of $125.56 billion.

The e-commerce and technology titan went into its important holiday quarter report on a strong note and 2021 will be no different as features if the pandemic persists.

Just a quick rewind to the third quarter, revenue and earnings also easily beat consensus estimates, and Amazon perennially guides up. This is becoming a constant pattern with the stock boding well for the future stock price.

Investors like companies who constantly over-deliver on earnings metrics.

The biggest bombshell of yesterday’s report was clearly that Jeff Bezos, the company’s founder and CEO, would leave from his role in the third quarter of 2021.

I thought it was interesting that after-hour trading was largely indifferent as investors were digesting the founder leaving his creation.

Next on deck is Andy Jassy, who currently leads Amazon Web Services (AWS), and will take over Bezos’ job.

Bezos will stick around in an “executive chairman” role and I envision this as Bezos not really leaving and still handling all the “big vision” stuff.

Inside the company, Jassy is the highest profile candidate and part of the most profitable part of the company giving him major clout.

This is out of the same mold of Microsoft’s CEO Satya Nadella who was also promoted to the top via the cloud division.

Bezos will now have more time to spend on Day 1 Fund which is a non-profit organization that will launch and operate a network of high-quality, full-scholarship Montessori-inspired preschools in underserved communities.

Along with that, he will spend time with the Bezos Earth Fund, Blue Origin, The Washington Post while Jassy handles the daily grind of the operation.

Don’t forget that Bezos is the largest shareholder, but because Amazon has become quite heralded for grooming top-level management, the company won’t miss a beat with Jassy.

Just look at what Jassy did in the fourth quarter.

Amazon Web Service (AWS) grew revenue 28% to $12.74 billion. That year-over-year growth rate held roughly steady compared to the third quarter and is the U.S. market share leader in cloud web hosting.

AWS operating income grew even more strongly, jumping 37% to nearly $3.6 billion.

Awarding the best performing manager at a company is something good companies do.

The pandemic, in itself, was a major catalyst to take revenue growth higher and sales got a boost from the company's annual Prime Day event, which was pushed back to the fourth quarter this year from its usual place in the third quarter due to the global crisis.

This year could be a similar repeat of 2020 with consumers crazy for e-commerce services and Amazon, best of breed service.

This should be a buy on every small dip stock and simply the best company in the world right now whether examining tech or anything else.

February 3, 2021 - Quote of the Day

Tech Letter

“Our goal is not to build a platform; it's to be across all of them.” – Said CEO of Facebook Mark Zuckerberg

February 1, 2021

Tech Letter

Mad Hedge Technology Letter
February 1, 2021
Fiat Lux

Featured Trade:

(A SLAM DUNK TECHNOLOGY)
(BIG TECH)

A Slam Dunk Technology

Tech Letter

SLAM is better known as Simultaneous Localization and Mapping technology and any tech investor needs to know about how it works because it could power your future tech portfolio.

I would emphasize the ‘Localization & ‘Mapping’ as the main portion of SLAM.

SLAM is essentially an optimization solution.

For a machine to comprehend, the device’s sensors collect visual data from the physical world in the form of reference points.

These points aid the machine in deciphering between limits.

Google’s AR platform, Tango, uses advanced SLAM to interact with the surroundings.

The device tries to simultaneously localize by finding the location of sensors with reference to its surroundings.

Then the technology will map the layout and framework of the environment that the device is in.

This is powered by various algorithms that simultaneously localize and map the objects.

Did you get all that?

Measurements are constantly taken as the device moves through the surroundings and SLAM diminishes inaccuracies of the measurement method.

It then predicts the position of unknown variables, like unknown points on 3D objects in the machine’s point of view.

One real-life example is how Google uses SLAM for its self-driving cars.

It is easy to navigate spaces that are known.

But what about unknown terrains?

SLAM negotiates an unknown environment and navigates through spaces by filling out the solution with the algorithms.

SLAM is best applicable for situations with no prior reference point.

Google’s driverless cars deploy autonomous technology that operates self-driving cars using a roof-mounted LIDAR sensor to create a 3D map of its surroundings.

A rapid response is critical in this technology since the car is moving at high speeds and acceleration.

These mappings are augmented over the already existing Google maps.

Another simple application of SLAM tech is the food business.

Machine-based SLAM technologies will most likely add value in fast food environments and could include 3D Time of Flight, for tasks like locating and placing a hot dog in a bun and placing items on a plate.

Thermal imaging could also help keep monitor the readiness of the food.

These technologies could enable robotic tasks that could include automated slicing and cutting on pre-prepped food materials, applying toppings or spices.

Combining such a low-cost sensor with a robot arm or mechanism and constraining the food production area could provide an ideal platform for defined automated tasks.

Navigation on Mars also uses SLAM tech wherein landmarks have to be revisited several times.

Autonomous systems are the obvious applications for SLAM and companies like Cortica have already built their well-known technology in localization and mapping for driverless cars in Israel.

Every tech behemoth has already made inroads in SLAM tech making the stakes higher than ever and race to refine it.

Apple in its attempt to enter the AR/VR space built ARKit that heavily depends on SLAM.

With the pandemic and many businesses shuttered, there will inevitably be less human-to-human contact giving way to robots or machines that utilize SLAM technology supplemented by 3D stereo vision, and LiDAR technology.

This will successfully provide real-time environment mapping and navigation.

Whether it is fast food, mars expeditions, autonomous driving, it is clear now that there is an influential place for this technology to drive revenue for these big tech companies that are currently refining the technology.

This could widen the capabilities between the tech Goliaths and smaller firms.

SLAM TECH: INCHING CLOSER TO YOUR DAILY LIFE

February 1, 2021 - Quote of the Day

Tech Letter

“Intellectual property has the shelf life of a banana.” – Said Co-Founder of Microsoft Bill Gates

January 29, 2021

Tech Letter

Mad Hedge Technology Letter
January 29, 2021
Fiat Lux

Featured Trade:

(THE OTHER STREAMING SERVICE)
(FUBO), (ROKU), (TTD)

The Other Streaming Service

Tech Letter

I was going to hold off on writing about this streaming service, but the shares are up another 15% this morning on a down day and that has forced my hand.

Streaming platforms have done extremely well during the pandemic and it is a no-brainer to put two and two together because consumers stuck at home would obviously mean more streaming consumption.

But what about those streaming services that you have not heard about?

They do exist and now I am here to tell you about one of them.

Enter fuboTV (FUBO).

FuboTV is an American streaming television service that focuses primarily on channels that distribute live sports, including NFL, MLB, NBA, NHL, MLS, and international soccer, plus sports news, network television series, and movies.

Yes, I must admit that fuboTV isn’t the newest company. The company was established in 2015 and some of the hardcore streamers will see this service pop up on their Roku (ROKU) amongst other platforms.

After a more focused migration into live sports television, a key deal to bring Disney’s ESPN to its platform, and a pair of acquisitions to allow sportsbook operations beginning in 2021.

FUBO has potential and is already showing robust growth backed by the kind of subscriber numbers needed to turn an eventual profit.

November’s third-quarter print showed accelerating subscriber growth from 58% to 72% and sales surging from 71% to 80%.

I am quite positive on FUBO’s ability to monetize traffic at much higher rates than its competitors.

That includes streaming hardware darling Roku, which captures less than one-third of FUBOs per user ad revenue.

FUBO had just 545,000 subscribers entering into 2021, but its free-spending audience that totals an average of four hours a day streaming the platform is a bedroom piece of foundation to this upstart company.

It is generating an average $7.50 in monthly ad revenue per user, and that's on top of the $65 monthly fee for the entry-level plan featuring 118 different channels.

The big selling point for fuboTV is that more than three dozen of those networks are dedicated sports channels.

FUBO’s capture of ESPN last summer was a coup, but it also dropped Turner's sports-heavy properties.

It’s true that it is not the perfect service, and is missing some crucial content.

They are also not carrying Sinclair's regional sports channels.

Cord cutters are helping this stock be hard to bet against after joining the services in droves in 2020.

FUBO actually was laser-focused on European soccer at the beginning but understood they needed to branch out to capture other pro sports fans and widen its audience.

Unlike Netflix, advertising is a key component in the company's revenue. It works with top ad-tech companies like The Trade Desk (TTD) and Magnite, and these partnerships are helping it with growth.

In the third quarter, ad revenue grew 153% year over year.

FUBO's ad business is already far ahead of Roku's, perhaps demonstrating the greater monetization potential of live sports and TV compared to on-demand streaming.

FUBO believes it can generate more than $20 in ARPU after paying the third-party vendors it works with.

A net loss of $402.5 million through the first nine months of 2020 is standard for most teething growth companies and the unprofitability shouldn’t stop investors from this stock.

If you do choose to dip your toe into this stock, then be aware the volatility might make you feel unsteady at night.

The wild swings are a sign of an immature company growing into its investor base.