Qualcomm (NASDAQ:QCOM) stock is selling for about what it did a year ago despite 45% growth for fiscal 2021 and nearly 15% growth so far this year. That is a price of $138.55 per share, a market cap of $156.15 billion, and a price to earnings ratio of 15.88. There is also a dividend hike to $3 per year, which will yield over 2% at the present price.
Blame the great tech downgrade. Since last November, when unprofitable tech stocks began rolling over, the whole sector has been under pressure. Since 2022 started, Qualcomm stock is down 24%.
Even an endorsement from TV analyst Jim Cramer hasn’t helped. You can still get Qualcomm for about the price he says his investment club paid for it on Mar. 10.
Qualcomm has dominated the communication chip market for decades. Chances are excellent your phone is powered by a Qualcomm Snapdragon processor.
Under former Chief Executive Officer Steve Mollenkopf, Qualcomm fought a global war over its intellectual property. Its technology was put into universal standards, but critics charged it wasn’t licensing it under Fair, Reasonable and Non-Discriminatory (FRAND) standards, making it impossible for them to compete. At one point, Qualcomm even filed to stop production of iPhones in China over patent rights.
The main Apple (NASDAQ:AAPL) dispute was settled in 2019. But Apple continues to move toward bypassing Qualcomm and making its own chips. Qualcomm also lost an antitrust suit in South Korea.
If Apple can make its own smartphone chips, other Chinese phone makers think they can do the same. China wants to control its supply chain just like Intel (NASDAQ:INTC) is consolidating in the U.S.
Under Mollenkopf’s successor, Brazilian engineer Cristiano Amon, Qualcomm is now taking its fight to the market and looking to create new markets. It is fast-tracking the release of its latest Snapdragon chip. It has bought Arriver to enhance its offerings for self-driving cars. It is promising to locate users within 3 feet. Its machine learning performance is comparable to that of Nvidia (NASDAQ:NVDA).
What a Fool Believes
Tech stocks usually rise or fall ahead of the economy. Right now, they’re pointing toward economic trouble ahead.
Excuses for investment losses are easy to find. One is Qualcomm’s continuing competition with MediaTek of Taiwan. JPMorgan Chase (NYSE:JPM) fears a drop in smartphone demand.
Inflation, war, and supply chain problems are all worrying investors. There is a fear that 5G, the mobile technology Qualcomm and its customers have been hyping for years, was oversold. The threat that wireless would replace wired cable TV service is said to be overblown.
But the fears of investors have yet to appear in the chip market. Qualcomm sees its smartphone chip sales growing 12% per year through 2024. The dividend hike from 68 cents per quarter to 75 cents is an indication it believes its profits are sustainable.
The Bottom Line for QCOM Stock
Amon insists Wall Street is getting his company wrong.
He says Qualcomm is on the cusp of a revolution in artificial intelligence, with smart glasses and holographic displays that change how work is done. He insists the problem at Qualcomm is supply, not demand.
Wall Street doesn’t agree. They’re focused on the limits of smartphones. They’re selling the metaverse.
This creates a unique opportunity for investors. Technology is the greatest force we have for fighting inflation. It has been coming through since the 1980s. What will change the investment equation are applications and case studies where augmented reality, virtual reality, and artificial intelligence increase productivity.
The killer app is out there. Qualcomm and other chip companies have the tools to build it. If you agree with me on that, now is the time to buy the stock when it is cheap.
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Source: Investor Place