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Combined with innovations in battery storage and renewables, the semiconductor sector remains future-focused, particularly thanks to the innovations of industry leaders like Nvidia (NVDA) and Broadcom (AVGO). If you missed the boat on these two success stories, underdogs like Qualcomm (QCOM) also offer opportunity as potential turnarounds.
Bernstein analysts named NVDA and AVGO their top picks for semiconductor stocks heading into the new year. But they also highlighted Qualcomm as a rising star. The investment bank sees promise in Qualcomm's strategic focus on Edge AI and the PC market. Analyst Stacy Rasgon pointed to the company's extensive product portfolio and innovation pipeline as key drivers of long-term growth, stating, "We are in good shape to wait.”
About Qualcomm Stock
Founded in 1985, Qualcomm (QCOM) is a global leader in the telecommunications and semiconductor industry, specializing in its mobile computing chips. Qualcomm’s hardware powers nearly every smartphone on the planet. The company has capitalized on advancements in wireless technology, from 3G to 5G, driving the smartphone boom since the early 2000s.
With 5G technology opening new doors, Qualcomm has expanded into high-growth areas like IoT devices, connected cars, and industrial equipment. These segments are expected to play a pivotal role in the company's diversification strategy, reducing its reliance on the traditional smartphone market. Additionally, Qualcomm’s advancements in AI-enabled chipsets and its growing presence in automotive technology position it as a leader in next-generation connectivity solutions.
Valued at $170 billion by market capitalization, QCOM shares have underperformed the PHLX Semiconductor Sector index's ($SOX) 18% returns in 2024, rallying only 4.3% YTD. The lackluster performance stems from weaker chip demand in the automotive and industrial sectors.
Valuation and Dividend Policy
QCOM has remained a compelling option for dividend-seeking investors in the semiconductor industry. The company has consistently increased its annual dividend for the last 22 years, with a five-year growth rate of 6.2%. Its most recent quarterly dividend came in at $0.85 per share. The company offers a high yield of 2.26% with an annual payout of $3.40 per share and a sustainable payout ratio of 30.3%.From a valuation standpoint, Qualcomm shares are a bargain in the semiconductor space, trading at just 16.68x — a 45% discount to the sector median of 30x and 17% below its own historical average. These metrics present a compelling opportunity for long-term investors to capitalize on.
QCOM Pops After Q4 Earnings
On November 6, QCOM shares rose 4% after Qualcomm posted fourth-quarter earnings that beat expectations. Revenue of $10.24 billion surpassed Wall Street’s estimate of $9.90 billion, marking a 12% year-over-year increase driven by strong chip demand. Adjusted EPS came in at $2.26, topping forecasts of $2.01, while net income surged to $2.92 billion from $1.49 billion last year.
Breaking down performance by segments, QCT, which includes handset and IoT chips, saw $8.68 billion in revenue, up 18% year-over-year. Automotive sales surged 68% to $899 million, marking the fifth consecutive quarter of growth. The IoT segment grew 22%, reaching $1.7 billion. Meanwhile, QTL licensing revenue grew 21% YoY to $1.52 billion, highlighting the ongoing profitability of its patent portfolio.
CEO Cristiano Amon highlighted Qualcomm’s diversification beyond smartphones, citing advancements in AI chipsets and partnerships in automotive and industrial computing as key growth drivers.
Looking forward, Qualcomm projects first-quarter fiscal 2025 revenue between $10.5 billion and $11.3 billion, with the midpoint of guidance surpassing the consensus estimate of $10.59 billion.
Analysts tracking QCOM's full-year revenue estimate at $42.2 billion and EPS at $11.15, reflecting confidence in Qualcomm’s growth trajectory.
Recent News About QCOM
Currently, Qualcomm is tied up in a critical legal battle with Arm Holdings (ARM) in U.S. federal court over its purchase of Nuvia in 2021. Arm argues that the purchase violated a license agreement that it has with the U.K. company. If the court sides with Arm, Qualcomm could struggle in its efforts to challenge Apple's (AAPL) dominance with custom chips and restrict Qualcomm's ability to leverage Nuvia's innovations.
What Do Analysts Say About QCOM Stock?
Analysts at Bernstein are bullish on QCOM, maintaining an “Outperform” rating and a $215 price target.
Bernstein is not alone in its positive outlook for QCOM stock. The consensus among 32 analysts is a “Moderate Buy,” with 16 ratings of “Strong Buy.” The average 12-month price target of $205.85 indicates 37% upside potential from the current price.
Although the stock has not delivered notable returns in 2024, the AI and mobile market expansion prospects suggest it could be a big winner in 2025. Backed by a robust cash position and two decades of consistent dividend payouts, Qualcomm is well-prepared to sustain its leadership and drive innovation in next-generation technologies. Moreover, QCOM stock is currently trading well below its recent high, offering an attractive valuation and signaling a strong buy opportunity for investors.
