Troubled tech stock on a 2023 run continues higher in a down market. So we're trimming

Published Wed, Jan 18 20233:12 PM EST

We're selling 100 shares of Qualcomm (QCOM) at roughly $122.84. Following Wednesday's trade, Jim Cramer's Charitable Trust will own 525 shares of Qualcomm, decreasing its weighting in the portfolio to about 2.24% from 2.66%. The broader market may be lower Wednesday with the seven-day win streak in the Nasdaq and V anEck Semiconductor ETF (SMH) on pace to come to an end. However, shares of chipmaker Qualcomm were standing out in a sea of red, up about 2% late in the session. It's a confusing move because the only real piece of research we read about it Wednesday was from Citi, and the analysts did not provide a rosy view of the stock. Citi opened a "Negative Catalyst Watch" on Qualcomm Wednesday morning. What this basically means is that the analysts see an upcoming event that could drive a negative move in a stock price. A catalyst event could be a wide range of things. In some cases, it could be a data readout for a health-care company. Or it could be a company-specific event like an Investor Day or a new product launch. A catalyst event is typically something that triggers upward or downward revisions to future earnings estimates. Stocks typically move higher when revisions are upward but fall when earnings estimates come down. In this case, the event of Citi's focus is Qualcomm's upcoming earnings report on Feb. 2. Citi thinks the December quarter results could be in-line with the consensus estimate, but their concern is about the guidance. The analysts believe the company will guide March quarter sales and earnings-per-share estimates 6% below consensus due to the ongoing correction in the handset market. It's no secret that Qualcomm is currently working through a glut of handset chips, but Citi appears to see the correction taking longer than what the Street predicts. This is only the opinion of one shop, so what they predict should be taken with context. There are many analysts that cover Qualcomm: some are bullish, some are bearish, and each one has excellent reasons that support their individual investment cases. There is also always the outstanding question of what is already "priced in" and reflected in the current stock price, and what are investors willing to look through. This is one of the biggest debates facing investors in technology stocks in 2023. We mention all of this as an acknowledgment of some of the current risks, but we are keeping it simple here. Qualcomm shares are having a strong showing in a weak market Wednesday, and the gains are extending the stock's run to about 12% year to date. Due to our ongoing concerns about chip inventories and how long their corrections will play out, we are trimming QCOM into this strength, and taking a disappointing loss of about 25% on stock purchased in February 2022. However, we feel it's better to take a smaller loss and mitigate against steeper downside should Citi's fears be justified. (Jim Cramer's Charitable Trust is long QCOM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The Nasdaq MarketSite in the Times Square neighborhood of New York, on Tuesday, May 31, 2022.

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