With technology playing an increasingly important role in our lives, chipmakers are seeing massive demand. But recently, many market leaders are falling along with the tech stock selloff. That said, now is the time to look for relative leaders such as Qualcomm stock, sitting close to its all-time high of $193 per share.
After crushing earnings expectations again in November, Qualcomm (Nasdaq: QCOMM) raced to new highs on heavy volume. Since then, Qualcomm stock is outperforming its peers with strong guidance lifting share prices.
Despite supply chain issues plaguing the industry, Qualcomm is overcoming these challenges by maintaining its inventory. The company is solidifying its position in the industry as a result.
On top of this, with 5G taking over the smartphone industry, the future is looking bright for the chipmaker. According to Ericsson’s latest Mobility Report, 5G devices are selling much quicker than 4G. And they are expecting to reach the majority by 2027.
Having said this, Qualcomm is leading the way with its Snapdragon 5G platform. Not only is the company applying its tech to smartphones, but other growing industries like VR and the IoT.
Keep reading to learn why Qualcomm stock is at all-time-highs (ATHs) and what to expect next.
Qualcomm Stock Hits New All-Time High
Over the past few months, the biggest headline is growth stocks taking a hit, with interest rates set to rise this year. On the other hand, value stocks continue to shine as investors look for safer bets.
Although Qualcomm stock struggled for years, the chipmaker came to life when the world needed it most. After the pandemic hit, the demand for chips skyrocketed as everything moved online. Then, the unexpected happened. Closed ports, labor shortages, and other issues tied up supply chains, creating a chip shortage.
The shortage rippled across different industries like carmakers and smartphones, leading them to cut back on forecasts. At the same time, it set the stage for a showdown between top chipmakers, showing who can navigate the rough seas best.
Having said that, tech stocks, in general, outperformed the market with low-interest rates as growth leaders became richly valued. Yet, in the past three months, Qualcomm stock is outpacing the competition.
After reaching prices upwards of $193 per share earlier this month, QCOM stock looks ready for the next leg higher. The strength is being propelled by the company’s strategic move into key industries.
In particular, the tech giant is expanding its portfolio to focus on three primary types of connected services.
- Mobile Broadband – According to new research, the global 5G market will grow at a 58.7% compound annual growth rate (CAGR).
- Communications – As 5G improves reliability, it can be increasingly used for high-level tasks. For example, it’s being used to power self-driving cars and improve healthcare services.
- Enabling IoT – Likewise, 5G helps connect the newest technology. For instance, smart homes and virtual reality (VR) perform best with the latest tech.
With this in mind, Qualcomm is taking advantage of the demand to bolster its business.
Improving Fundamentals
Qualcomm’s latest earnings report shows the company is positioning itself for the future with a growing top and bottom line in 2021. The company turned things around quicker than anyone expected and is now firing on all cylinders. Here are a few highlights from the report.
- Growing Revenue – Qualcomm’s top line grew 43% this year, reaching $33.57 billion.
- Expanding Segments – The company is seeing higher growth across all segments. In 2021, Handsets advanced 61%, RF Front End 45%, Automotive 44%, and IoT 66%.
- Balance Sheet Strength – A strong cash position, with lower debt than last year.
Also, with the company’s 12% growth in Q4, this marks the 5th straight quarter with double-digit revenue growth. As 5G technology becomes more widely adopted, Qualcomm stock is leading the technology behind powering these devices.
Not only is Qualcomm making money from producing these devices, but they also receive licensing fees. So, the company gets a share when its devices sell.
Qualcomm’s licensing business provides high margin profits as more companies rely on the technology. The business model is helping the company drive growth while chips are becoming harder to find elsewhere.
On top of this, when compared to the competition, Qualcomm stock seems like a fair value. Qualcomm currently has a forward P/E of 17.39 despite sitting just below ATHs. Compared to peers like Nvidia (58), AMD (42) and even Apple (32), QCOM seems like a steal.
Opportunities and Risks to Consider
With a wave of new 5G devices set to hit stores, Qualcomm is positioning itself to continue leading the way. Not only that, but new industries like self-driving cars and AR rely on the tech to improve performance.
Qualcomm already has deals in place with several automakers to use its tech to power self-driving capabilities, such as Honda, BMW and Volvo.
At the same time, technology is constantly evolving. Qualcomm stock will need to continue adapting to keep up with the ever-changing landscape. That said, several reports are swirling that Apple is planning to make its own in-house 5G chips.
If this is the case, it could be a major loss as Apple’s iPhone is leading the way for 5G devices. The iPhone maker is a huge partner for Qualcomm that helps drive steady revenue.
Another key point to consider is other competition creeping in. Apple is only one factor in the equation. But if other companies follow in their footsteps, it could spell trouble for Qualcomm.
Qualcomm Stock Forecast
So far, Qualcomm is doing an excellent job navigating the current environment. Despite several challenges these past few years, the company is turning things around and establishing its position for the future.
As new devices rely on 5G tech, look for Qualcomm to continue building its momentum. Sitting right under its ATH, Qualcomm stock looks ready to breakout.
With less attention from investors than its peers, Qualcomm stock is fairly priced. And more importantly, the company’s business model is proving superior, with licensing fees driving growth.
Looking ahead, Qualcomm is raising guidance with demand building. The chipmaker expects the demand to continue as new devices are introduced to the market. With this in mind, total revenue is now expecting to reach $10.8 billion in the first quarter.
Furthermore, Qualcomm stock has an average price target of $213.84, suggesting a 13% upside. QCOM stock will likely remain in ATH territory if the company continues growing at this rate.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.
