The stock market has been under immense pressure due to the twin fears — soaring inflation and economic contraction. The ongoing Russia-Ukraine war and supply chain disruptions have also caused shockwaves to the market.
The Fed recently raised interest rates by 75 basis points, the largest hike since 1994. The central bank has also signaled more rate hikes in the near term to clamp down on inflation, increasing the odds of the economy tipping into a recession. However, a top strategist at JPMorgan believes the U.S. economy will dodge a recession altogether.
Several fundamentally sound stocks have declined significantly in price this year as investors weighed the risk of an economic slowdown. However, we think QUALCOMM Incorporated (QCOM), Semtech Corporation (SMTC), and Good Times Restaurants Inc. (GTIM) appear to have bottomed after declining 30-40% year-to-date.
Given the potential rebound from the current price levels, these stocks could be ideal additions to your portfolio.
QUALCOMM Incorporated (QCOM)
QCOM engages in developing and commercializing foundational technologies for the wireless industry worldwide. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On May 17, Advanced Micro Devices, Inc. (AMD), a semiconductor company, and Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated, announced a collaboration to optimize the Qualcomm® FastConnect™ connectivity system for AMD Ryzen™ processor-based computing platforms and bring secure Wi-Fi remote management to AMD enterprise customers.
This marks their first step in bringing superior wireless connectivity to the AMD mobile computing roadmap. This partnership should prove to be strategically beneficial for the company.
On April 4, QCOM announced the completion of its acquisition of Arriver™ from SSW Partners, which should enhance Qualcomm Technologies’ ability to deliver open, fully integrated, and competitive Advanced Driver Assistance System (ADAS) solutions to automakers and Tier-1 suppliers at scale.
“As we become a key technology partner to the automotive industry, Arriver’s Driver Assistance assets will accelerate our efforts to deliver a leading ADAS solution as part of our Snapdragon® Digital Chassis™ platform,” said Nakul Duggal, senior vice president and GM, automotive, QCOM.
For the fiscal second-quarter ending March 2022, QCOM’s revenue increased 40.8% year-over-year to $11.16 billion. Its non-GAAP earnings before taxes grew 68% from the year-ago value to $4.26 billion. Non-GAAP net income for the quarter stood at $3.67 billion, reflecting a 67.6% increase year-over-year. Moreover, the company’s non-GAAP EPS was $3.21, up 69% from the prior-year quarter.
Street expects QCOM’s EPS for the current quarter ending June 2022 to improve 49.8% year-over-year to $2.88. The consensus revenue estimate of $10.88 billion for the same period represents a 36.1% increase year-over-year. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has slumped 34.3% year-to-date and 9.1% over the past month to close yesterday’s trading session at $120.09.
QCOM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
QCOM has a B grade in Value, Growth, and Quality. It is ranked #8 of 96 stocks in the B-rated Semiconductor & Wireless Chip industry.
In addition to the POWR Rating grades I’ve just highlighted, you can see the QCOM’s ratings for Stability, Sentiment, and Momentum here.
Semtech Corporation (SMTC)
SMTC designs, develops, manufactures, and markets analog and mixed-signal semiconductor products and advanced algorithms.
On June 21, SMTC announced the launch of a SaaS chip-to-Cloud service, LoRa Cloud™ Locator, that uses SMTC’s LoRa Cloud Modem & Geolocation services to demonstrate the asset tracking capabilities of LoRa Edge™. The service allows customers to experience the power of LoRa Edge™ devices and evaluate the platform’s accuracy and power consumption capabilities. This is expected to expand the company’s revenue stream.
On June 9, the company announced that Mt. Titlis, an integrated service provider supplying control center console products and intelligent control collaboration system solutions, has chosen to integrate SMTC’s BlueRiver® AV over the IP technology platform to optimize its Smart City Integrated Command Center, allowing for high quality, uncompressed audio and video processing and transmission.
“Semtech’s collaboration with Mt. Titlis showcases the unmatched benefits of the BlueRiver AV over IP platform in delivering the best possible audio and video experience available today,” said Don Shaver, VP of marketing of video products for SMTC’s Signal Integrity Products Group.
For the fiscal quarter ended May 1, 2022, SMTC’s net sales increased 18.7% year-over-year to $202.15 million. Its gross profit grew 24.2% from the year-ago value to $130.25 million. Operating income for the quarter stood at $47.05 million, reflecting a 68.2% increase year-over-year. Moreover, its EPS was $0.59, up 63.9% from the prior-year quarter.
Analysts expect SMTC’s revenue in the quarter ending July 2022 to come in at $208.29 million, indicating an increase of 12.6% year-over-year. Its EPS is expected to improve 44.8% year-over-year to $0.72. SMTC also beat the consensus EPS estimates in each of the trailing four quarters.
SMTC’s shares have slumped 38.5% year-to-date to close the last trading session at $54.73.
SMTC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our POWR Ratings system.
The company also has an A grade in Quality and a B in Growth. The stock is ranked #10 in the Semiconductor & Wireless Chip industry.
To get SMTC’s ratings for Momentum, Stability, Value, and Sentiment, click here.
Good Times Restaurants Inc. (GTIM)
GTIM engages in the restaurant business in the United States. The company operates and franchises Good Times Burgers & Frozen Custard; and Bad Daddy’s Burger Bar.
GTIM’s total net revenues increased 15.1% year-over-year to $33.60 million in the fiscal quarter ended March 29, 2022.
The company completed the acquisition of a Bad Daddy’s restaurant in Greenville, South Carolina, earlier this year. “This acquisition expands our presence in the Greenville market to two company-owned restaurants,” said Ryan Zink, President and CEO of GTIM.
GTIM’s shares have slumped 35.3% year-to-date to close the last trading session at $2.81. It has gained marginally over the past month.
The company has an overall rating of A, translating to Strong Buy in our proprietary rating system.
GTIM is also rated A in Value and a B in Quality, Momentum, Sentiment, and Growth. Within the A-rated Restaurants industry, it is ranked #1 of 47 stocks.
Click here to see additional POWR Ratings for Stability for GTIM.
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QCOM shares rose $1.21 (+1.01%) in premarket trading Friday. Year-to-date, QCOM has declined -33.71%, versus a -19.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...
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