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Analyzing Qualcomm Stock Performance in 2024 Is Qualcomm Stock Still a Buy After a 15% YTD Surge?

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The rise of artificial intelligence (AI), a pioneering force reshaping various sectors, has investors buzzing with excitement. Representing a transformative leap in technology, the AI revolution promises to revolutionize daily life across the board in the years ahead.

At the core of this revolution lie specialized semiconductor chips, crucial components for the advanced computing infrastructure required to execute intricate AI functions. As the global chip industry gears up to hit a monumental $1.13 trillion market size by 2033, semiconductors emerge as the indispensable tools driving the excavation of AI “gold.”

While stalwart AI chip giants like Nvidia (NVDA) and Advanced Micro Devices (AMD) have stolen the limelight, traditional semiconductor player Qualcomm (QCOM) commands attention as the unfolding AI era pours into devices. A closer look at QCOM reveals a compelling narrative.

The Journey of Qualcomm Stock

Pioneered in 1985 and headquartered in San Diego, Qualcomm Inc (QCOM) specializes in crafting and licensing semiconductor chips for mobile devices and wireless communication equipment like processors, modems, and RF systems. The company is also venturing into automotive tech and computing markets, boasting a colossal market cap of $182 billion.

A stalwart performer, Qualcomm stock has surged a robust 15% YTD, outstripping the tech-heavy Nasdaq-100 Index ($IUXX)’s 10.5% uptick. Over a more extended period, QCOM has notched up a 35% gain in the past 52 weeks.

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Despite a stellar stock performance, Qualcomm remains attractively priced at present levels. With a forward adjusted earnings multiple of 16.86x, the stock trades at a discount to the tech sector median of 25.24 and its own five-year average of 17.04.

Boasting a dividend yield of 1.96%, surpassing the tech sector median, Qualcomm has hiked its dividend consistently each year for two decades, setting the stage for potential Dividend Aristocrat status this decade, backed by a modest 36% payout ratio ensuring secure dividend coverage by QCOM’s earnings.

Qualcomm’s Fiscal Performance and Projections

Qualcomm’s fiscal first-quarter performance dazzled with revenue and earnings surpassing Wall Street estimates. The quarter witnessed revenue soaring to $9.9 billion, a 5% jump from the previous year, fueled by a 7% annual uptick in its core QCT business to $8.4 billion. Supported by a 31% margin, this growth stems from enhanced revenue scale, optimized product mix, and sustained operational efficiency. Noteworthy, revenues from the expanding automotive division surged by 31% year-on-year to $598 million.

Earnings per share (EPS) surged by an impressive 16% year-over-year to $2.75, outshining the consensus forecast of $2.37. Qualcomm boasts a commendable track record of exceeding Wall Street’s EPS projections since April 2020.

With a cash balance of $8.2 billion marking a significant upsurge from the previous year’s $5.1 billion, Qualcomm substantially outpaces its short-term debt levels of $914 million.

Looking forward, analysts foresee a 15.7% earnings growth in fiscal year 2024 and an 11% uptick in fiscal 2025. Revenue projections indicate a 6.14% increase in 2024 and an 8.28% rise in 2025 on average.

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Qualcomm’s AI Perspective and Diversified Portfolio

During the 2024 Mobile World Congress in Barcelona, Qualcomm’s CFO and COO Akash Palkhiwala shared insights on the company’s poised position to harness the upcoming AI wave. He highlighted the imminent deployment of large language models on various devices, envisioning a vast opportunity for Qualcomm as these models penetrate edge devices extensively like phones, PCs, automotive, and IoT gadgets.

Qualcomm extends licensing agreements with key mobile partners, notably inking an extension deal with Apple (AAPL) till 2027, underlining Apple’s reliance on Qualcomm’s modems. Further, long-term agreements were extended with two prominent Chinese OEMs.

Noteworthy, Qualcomm unveiled the Snapdragon 8 Gen 3 Mobile platform, ushering generative AI capabilities into high-end Android smartphones. Samsung has swiftly adopted this platform in its Samsung Galaxy S24 Ultra, reinforcing their alliance through a multi-year agreement for Snapdragon platform integration in flagship Galaxy smartphone launches from 2024.

Analyst Consensus Outlook on Qualcomm Stock

Analysts echo a “Moderate Buy” sentiment for QCOM stock, with 15 out of 25 analysts rating it as a “Strong Buy,” 9 as a “Hold,” and only 1 as a “Strong Sell.” The average target price stands at $150.38, reflecting a minor discount of roughly 10%, yet three analysts bear a positive outlook with Street-high target prices of $180 – Canaccord Genuity, KeyBanc, and Wolfe Research anticipate an upside potential of nearly 7.8% from current levels.

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On the publication date, the author, Pathikrit Bose, had no direct or indirect holdings in any securities mentioned. All the information presented in this article is for informational purposes only. For more details, refer to the Barchart Disclosure Policy here.

The opinions expressed herein are solely those of the author and do not necessarily align with Nasdaq, Inc.

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