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Amid the rapid transition toward a fully digital future, semiconductors are essential, powering almost every device we touch, from our laptops and smartphones to self-driving cars. The industry, already worth hundreds of billions, is poised to soar past $2 trillion, expanding at a CAGR of 14.9% by 2032.
Semiconductor giants like Nvidia (NVDA), Broadcom (AVGO), Advanced Micro Devices (AMD), and QUALCOMM Incorporated (QCOM) are leading the charge, continuously innovating to meet the skyrocketing demand. QUALCOMM, a key player in mobile chipsets, powers the wireless world, from 5G connectivity to Internet of Things (IoT) devices, keeping our smartphones fast and smooth.
QCOM stock took a hit after peaking in June, pressured by concerns over inventories and weak smartphone demand. However, key hedge funds led by billionaires were buyers of the semiconductor name in Q2, suggesting the big money is still all-in on this chip stock.
About QUALCOMM Stock
San Diego-based QUALCOMM Incorporated (QCOM) is a fabless semiconductor company with a market cap of $182.6 billion. It operates through its Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI) segments.
Beyond its core semiconductor business, the company drives innovation in smart home tech, automotive systems, and more with its renowned Snapdragon processors and 5G modems. This year, QUALCOMM’s AI-powered Snapdragon processors have been the star players, boosting performance across PCs, gaming, smartphones, and cars.
Shares of the semiconductor giant have rallied 40.5% over the past 52 weeks, outpacing the broader S&P 500 Index’s ($SPX) gain of 22.4% over the same period. But with QCOM down 29% from its June highs, it’s still possible to buy the dip.
QCOM, priced at 21.24 times forward earnings, appears to be a cheap semiconductor stock to buy right now, with the shares priced at a discount to peers like Texas Instruments (TXN) and AVGO.
The chip giant is also generous with shareholders. In fiscal Q3, QCOM returned about $2.3 billion to stockholders through $1.3 billion of share repurchases, and $949 million was paid out as cash dividends.
Boasting 20 consecutive years of dividend growth, the chip giant announced a quarterly dividend of $0.85 per share in July, payable on Sept. 26. This brings its annualized dividend to $3.40 per share, yielding 2.08%.
QUALCOMM Beats on Q3 Earnings
QUALCOMM dropped its fiscal Q3 earnings report on July 31. The chip giant blew past both revenue and earnings expectations, racking up $9.4 billion in revenues, an 11% jump year over year, while its adjusted EPS soared 24.6% to $2.33.
Its revenue streams are split into two main segments - the QCT segment, which includes its semiconductor business, grew 12% to $8.1 billion. The QTL segment, responsible for licensing QUALCOMM’s vast patent trove, reported a 3% increase to $1.3 billion.
The smartphone market is on the mend, spurred by AI. Handset chip sales surged 12% to $5.9 billion, and automotive chip sales exploded by 87% to $811 million. However, IoT chip sales faced an 8% dip, totaling $1.4 billion.
Looking ahead, QUALCOMM is set to launch its next-gen AI products — the Snapdragon X series for PCs and Snapdragon 8 Gen 3 for smartphones — which should support future revenue. The company’s guidance exceeded Wall Street’s expectations, predicting non-GAAP EPS between $2.45 and $2.65, with revenue estimates ranging from $9.5 billion to $10.3 billion.
The firm's forecast indicates 14% annual revenue growth and a 26% boost in EPS based on the midpoint of its guidance. Despite the upbeat numbers, investors hit the panic button when CEO Cristiano Amon suggested the smartphone market recovery might be slow, with growth remaining flat or in the low single digits.
Longer term, management anticipates that by 2027, at least 50% of PCs will be AI-capable. With its leading technology and competitive roadmap, QUALCOMM aims to be a top silicon supplier for these devices. Additionally, the rise of extended and mixed reality devices, driven by GenAI advancements, is expected to boost demand.
Analysts predict solid earnings growth for QUALCOMM, with EPS projected to rise 20.4% to $7.98 in fiscal 2024 and another 10.2% increase to $8.79 in fiscal 2025.
Billionaires Bet on QUALCOMM
In the world of big-money investing, billionaire Phillipe Laffont’s firm Coatue Management made a strategic play in Q2, increasing its stake in Qualcomm by 43.1% - up from 3.66 million shares in Q1 to 5.24 million shares in Q2. The stake, worth $1 billion, represents 4.1% of Laffont’s portfolio, signaling his strong conviction in QCOM’s potential.
Also during Q2, Renaissance Technologies, the investment management firm founded in 1978 by the late billionaire and mathematician Jim Simons, entered the game with a fresh 1 million shares of QCOM, worth $218.5 million. Both powerhouses are placing major bets on Qualcomm, signaling strong confidence in the tech giant’s future.
What Do Analysts Expect for QUALCOMM Stock?
Overall, Wall Street rates QCOM stock a “Moderate Buy.” Out of the 29 analysts in coverage, 15 suggest a “Strong Buy,” one recommends a “Moderate Buy,” 12 analysts are playing it safe with a “Hold” rating, and one rates it a “Strong Sell.”
Based on its mean target price of $213.59, QCOM stock has an upside potential of 30.5% from current levels. Its Street-high target price of $270 implies the stock could rally as much as 65% in the next 12 months.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
