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Qualcomm Shares Gain 52% in the Past Year: Reason to Buy QCOM Stock?
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Buoyed by a holistic growth model, Qualcomm Incorporated (QCOM - Free Report) shares have gained 52% over the past year compared with the industry’s growth of 46.9%. It has outperformed Hewlett Packard Enterprise Company (HPE - Free Report) but lagged Broadcom Inc. (AVGO - Free Report) — a couple of other major players in the industry.
Qualcomm is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor company for the intelligent edge. The company is well-positioned to meet its long-term revenue targets driven by solid 5G traction, greater visibility and a diversified revenue stream.
Image Source: Zacks Investment Research
QCOM Gaining Healthy Traction in EDGE Networking
Qualcomm is witnessing healthy traction in EDGE networking that helps to transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The company intends to harness artificial intelligence (AI) to meet increased demands for essential products and services that are the building blocks of digital transformation in a cloud economy.
With the accelerated rollout of 5G technology, Qualcomm is benefiting from investments toward building a licensing program in mobile. The company is well-positioned to meet its long-term revenue targets driven by solid 5G traction, greater visibility and a diversified revenue stream. In addition, the chip manufacturer envisions solid growth opportunities within the mobile space, driven by the strength of its Snapdragon portfolio.
Snapdragon Mobile Platform Series: QCOM’s USP
Leveraging processors with multi-core CPUs with cutting-edge features, amazing graphics and worldwide network connectivity, Qualcomm Snapdragon mobile platforms are fast with superb power efficiency. Smartphones and mobile devices built with Snapdragon mobile platforms enable immersive augmented reality and virtual reality experiences, brilliant camera capabilities, superior 4G LTE and 5G connectivity with state-of-the-art security solutions.
Qualcomm has joined forces with Microsoft Corporation (MSFT - Free Report) to launch Snapdragon Dev Kit for Windows. The solution powered by Snapdragon X Elite is engineered to support developers to create, debug and test applications for next-generation AI PCs. Qualcomm also extended its Qualcomm AI Hub to support Snapdragon X Series Platforms. This will equip developers with advanced resources, tools and services to unlock the full potential of on-device generative AI in high-tech Windows PCs. The solution is already witnessing solid market traction among leading global PC manufacturers, including ASUS, Samsung, Dell and HP.
QCOM Focusing More on Automotive Business
The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification. Qualcomm believes it is on track to become the largest smartphone radio frequency front-end supplier by revenue in the near future. Automotive revenues surged 87% to a record high of $811 million in third-quarter fiscal 2024, driven by increased content in new vehicle launches with its Snapdragon Digital Chassis platform. This was the 15th consecutive quarter in which Qualcomm recorded double-digit growth in automotive revenues. The company expects automotive revenues to increase to more than $4 billion in fiscal 2026.
Estimate Revision Trend for QCOM
Earnings estimates for Qualcomm for fiscal 2024 have moved up 9.5% to $10.01 over the past year, while the same for fiscal 2025 has jumped 14.5% to $10.98. The positive estimate revision depicts bullish sentiments for the stock.
Image Source: Zacks Investment Research
Margin Woes Persist for QCOM
Over the years, Qualcomm's margins have declined due to high operating expenses and R&D (research & development) costs. The company expects softness in the handset market and a weaker overall mix of devices to continue in the near future. Shift in the share among original equipment manufacturers at the premium tier has reduced Qualcomm's near-term opportunity to sell integrated chipsets from the Snapdragon platform. Aggressive competition in the mobile phone chipset market from low-cost chip manufacturers as well as established players is also likely to hurt Qualcomm's profits. Although the global smartphone market is expected to maintain its momentum over the next three to four years, a major portion of this growth is likely to come from the low-cost emerging markets, which may weigh on Qualcomm's margins.
Image Source: Zacks Investment Research
Adverse U.S.-China Geopolitical Ties Hurt QCOM
The chip-making firm has a significant presence in more than 12 cities in China, aiming to drive advancements in semiconductors and mobile telecommunications for the larger benefit. The company has been a key supplier of chips and other related components to local smartphone manufacturers like Xiaomi, Huawei and its spin-off brand Honor. However, it appears that Qualcomm is increasingly finding it difficult to maintain its operations in China.
Much of these hardships can be attributed to the continued U.S.-China trade spat. The U.S. Commerce Department has long imposed various trade restrictions against China that banned the sale of high-tech equipment, chips, components and related technology to develop high-end smartphones and AI-enabled chips. Despite adding China-based Huawei to the ‘Entity List,’ the newly developed Huawei Mate 60 smartphone is believed to have violated the U.S. trade sanctions. This has forced the U.S. watchdog to enforce stricter trade restrictions while conducting the authenticity of the trade violations.
End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, Qualcomm appears to be a solid investment proposition. A strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. With improving earnings estimates, the stock is witnessing a positive investor perception.
However, stiff competition and softness in key end markets are likely to put pressure on the bottom-line growth. High R&D costs eroded its profitability to a large extent. Qualcomm is reportedly undertaking job cuts and retrenchments to sustain its business in China, raising questions about its long-term viability plans in the communist country. With a Zacks Rank #3 (Hold), Qualcomm appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Qualcomm Shares Gain 52% in the Past Year: Reason to Buy QCOM Stock?
Buoyed by a holistic growth model, Qualcomm Incorporated (QCOM - Free Report) shares have gained 52% over the past year compared with the industry’s growth of 46.9%. It has outperformed Hewlett Packard Enterprise Company (HPE - Free Report) but lagged Broadcom Inc. (AVGO - Free Report) — a couple of other major players in the industry.
Qualcomm is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor company for the intelligent edge. The company is well-positioned to meet its long-term revenue targets driven by solid 5G traction, greater visibility and a diversified revenue stream.
Image Source: Zacks Investment Research
QCOM Gaining Healthy Traction in EDGE Networking
Qualcomm is witnessing healthy traction in EDGE networking that helps to transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The company intends to harness artificial intelligence (AI) to meet increased demands for essential products and services that are the building blocks of digital transformation in a cloud economy.
With the accelerated rollout of 5G technology, Qualcomm is benefiting from investments toward building a licensing program in mobile. The company is well-positioned to meet its long-term revenue targets driven by solid 5G traction, greater visibility and a diversified revenue stream. In addition, the chip manufacturer envisions solid growth opportunities within the mobile space, driven by the strength of its Snapdragon portfolio.
Snapdragon Mobile Platform Series: QCOM’s USP
Leveraging processors with multi-core CPUs with cutting-edge features, amazing graphics and worldwide network connectivity, Qualcomm Snapdragon mobile platforms are fast with superb power efficiency. Smartphones and mobile devices built with Snapdragon mobile platforms enable immersive augmented reality and virtual reality experiences, brilliant camera capabilities, superior 4G LTE and 5G connectivity with state-of-the-art security solutions.
Qualcomm has joined forces with Microsoft Corporation (MSFT - Free Report) to launch Snapdragon Dev Kit for Windows. The solution powered by Snapdragon X Elite is engineered to support developers to create, debug and test applications for next-generation AI PCs. Qualcomm also extended its Qualcomm AI Hub to support Snapdragon X Series Platforms. This will equip developers with advanced resources, tools and services to unlock the full potential of on-device generative AI in high-tech Windows PCs. The solution is already witnessing solid market traction among leading global PC manufacturers, including ASUS, Samsung, Dell and HP.
QCOM Focusing More on Automotive Business
The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification. Qualcomm believes it is on track to become the largest smartphone radio frequency front-end supplier by revenue in the near future. Automotive revenues surged 87% to a record high of $811 million in third-quarter fiscal 2024, driven by increased content in new vehicle launches with its Snapdragon Digital Chassis platform. This was the 15th consecutive quarter in which Qualcomm recorded double-digit growth in automotive revenues. The company expects automotive revenues to increase to more than $4 billion in fiscal 2026.
Estimate Revision Trend for QCOM
Earnings estimates for Qualcomm for fiscal 2024 have moved up 9.5% to $10.01 over the past year, while the same for fiscal 2025 has jumped 14.5% to $10.98. The positive estimate revision depicts bullish sentiments for the stock.
Image Source: Zacks Investment Research
Margin Woes Persist for QCOM
Over the years, Qualcomm's margins have declined due to high operating expenses and R&D (research & development) costs. The company expects softness in the handset market and a weaker overall mix of devices to continue in the near future. Shift in the share among original equipment manufacturers at the premium tier has reduced Qualcomm's near-term opportunity to sell integrated chipsets from the Snapdragon platform. Aggressive competition in the mobile phone chipset market from low-cost chip manufacturers as well as established players is also likely to hurt Qualcomm's profits. Although the global smartphone market is expected to maintain its momentum over the next three to four years, a major portion of this growth is likely to come from the low-cost emerging markets, which may weigh on Qualcomm's margins.
Image Source: Zacks Investment Research
Adverse U.S.-China Geopolitical Ties Hurt QCOM
The chip-making firm has a significant presence in more than 12 cities in China, aiming to drive advancements in semiconductors and mobile telecommunications for the larger benefit. The company has been a key supplier of chips and other related components to local smartphone manufacturers like Xiaomi, Huawei and its spin-off brand Honor. However, it appears that Qualcomm is increasingly finding it difficult to maintain its operations in China.
Much of these hardships can be attributed to the continued U.S.-China trade spat. The U.S. Commerce Department has long imposed various trade restrictions against China that banned the sale of high-tech equipment, chips, components and related technology to develop high-end smartphones and AI-enabled chips. Despite adding China-based Huawei to the ‘Entity List,’ the newly developed Huawei Mate 60 smartphone is believed to have violated the U.S. trade sanctions. This has forced the U.S. watchdog to enforce stricter trade restrictions while conducting the authenticity of the trade violations.
End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, Qualcomm appears to be a solid investment proposition. A strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. With improving earnings estimates, the stock is witnessing a positive investor perception.
However, stiff competition and softness in key end markets are likely to put pressure on the bottom-line growth. High R&D costs eroded its profitability to a large extent. Qualcomm is reportedly undertaking job cuts and retrenchments to sustain its business in China, raising questions about its long-term viability plans in the communist country. With a Zacks Rank #3 (Hold), Qualcomm appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.