Qualcomm Stock: 5G Leader at a Bargain Price?

Chip giant QUALCOMM Incorporated (NASDAQ:QCOM) was the ultimate chip company to hold before the artificial intelligence rush kicked in. Now, the chip industry is being dominated by chipmaking behemoths that promise to help create large language models and advanced computing prowess.

Regardless, QUALCOMM has established quite a comfortable spot for itself in the mobile chipset market but there are some worries lurking on the horizon for shareholders. To address these worries, QUALCOMM has been willing to branch out into avenues beyond its mobile and PC market core competencies.

Will it be enough to stave off the bearish sentiment? And is Qualcomm a buy?

What Is QUALCOMM Facing Now?

QUALCOMM’s stock is not having a good time on Wall Street right now. Over the past year, the share price has tumbled by more than 10%, while over the past six months, the stock is down by close to 6%.

Given how prominent QUALCOMM is with a laundry list of patents, and how much of a chip industry darling it was just a few years ago, we examine it to uncover whether this chipmaking giant is a bargain buy now.

From a multiple perspective, the price now sits at 13.21x its forward non-GAAP earnings, which is lower than rivals. It is also lower than its own five-year average.

QUALCOMM is facing a concerning geopolitical backdrop and there has been a lot going on when it comes to U.S.–China relations.

Firstly, even during the previous Biden administration, the two countries had engaged in a “tech war” with chip companies at the epicenter of it all. The ensuing battle resulted in trade-related conflicts, with both sides vying for technological dominance over the other.

The fragility of semiconductor supply chains became apparent with chip shortages, and that in turn threatened everything from car manufacturers to kitchen appliances builders.

Tariffs are also a key measure that the new Trump administration is adopting. It was not long after President Trump took office before he applied 25% tariffs on goods to Mexico and Canada. He also imposed a 10% tariff on imports from China and then followed it with an additional 10%, resulting in a 20% tariff jump since Trump took office.

While it was a shock for Mexico and Canada to suddenly face a high tariff, China, already a participant in the tech war, was ready with retaliation. For now, China’s retaliatory tariffs are confined to the farm sector. Yet, the tariffs may expand to other sectors as well.

China Exposure a Serious Concern?

This is the backdrop facing QUALCOMM shareholders. As already stated, the company is hyper-exposed to the Chinese market thanks to high demand in China due to the proliferation of premium Android devices. The company has long-term agreements with Chinese manufacturers Honor and Shenzhen Transsion Holdings.

QUALCOMM has also pointed to the fact that the concentration of its business in China and a significant dependency on Chinese original equipment manufacturers (OEMs) for top line stability and that in turn could have a negative impact on the company’s prospects in light of the U.S.-China trade war.

Management also pointed out how its customers in the country might grow and develop integrated circuits of their own, which could put QUALCOMM in a tough position. In fact, the company had already faced it when popular smartphone maker Apple Inc. (NASDAQ:AAPL) made it clear that it would become less reliant on QUALCOMM.

Apple has devised its own C1 subsystem, which the company believes will result in longer battery life for iPhones. Apple also plans to roll out its modem chips over more of its devices. After this forecast was made public, QUALCOMM predicted its share of Apple modems would drop to 20% by 2026.

The company has also released its own modem (X85) to counter the gradual loss of Apple as a customer. QUALCOMM’s CEO, Cristiano Amon, told CNBC that this would create a “huge delta” between what QUALCOMM can achieve versus what Apple can achieve.

Is QUALCOMM Stock a Buy Sell or Hold?

Qualcomm is a strong buy according to analysts with upside to $198.50 per share as the consensus.

QUALCOMM has last reported its first quarterly results for fiscal 2025 (the quarter that ended December 29, 2024). In that, the company reported a 17% jump in its revenue compared to the prior year’s period to come in at $11.67 billion. Its QCT segment remained heavily reliant on handsets (which made up 75% of the segment’s revenue).

Yet, handsets revenue only grew by 13% year-over-year, while automotive revenue mushroomed by 61% during the same period. The company is also posting profits, with its non-GAAP earnings before taxes clocking in at $4.43 billion, about 23% higher than what it was in the year-ago period.

So, the company stands at an interesting point. There are definitely reasons to be concerned when looking at the big picture but the company’s strong gains imply all is not lost for existing shareholders and some brighter days lie ahead.

QUALCOMM is essentially reaping some diversification benefits, with an ambitious target of $22 billion of non-handset revenues by fiscal 2029. 

With a perfect Piotroski Score of 9, there’s lots to like about Qualcomm beyond its upside potential and 2.17% dividend yield.

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