Qualcomm Vs Marvell Stock: Which Is Best?

Qualcomm, Inc. (NASDAQ:QCOM) and Marvell Technology Group Ltd. (NASDAQ:MRVL) are two semiconductor companies at the heart of the race to 5G. Both make mobile chips, but they have also expanded into a variety of data infrastructure markets to support the Internet of Things (IoT).

For investors, which is the better option between Qualcomm vs Marvell stock?

It wasn’t long ago that Broadcom Inc (NASDAQ:AVGO) and Intel Corporation (NASDAQ:INTC) were in acquisition talks over Qualcomm. The bulk of the company’s revenue may come from chips, but its profits mostly come from licensing its broad array of patents.

Marvell also makes a lot of money off acquisitions. It bought over a dozen companies from 2000-2020 and in October announced a $10 billion deal to buy data center component chip maker Inphi. This cemented the company’s push into data centers as Qualcomm fights to maintain its lead in mobile devices.

Are these two companies up to speed or will they result in a crash for investors hoping to beat the market?

Qualcomm Is A Profit Machine

Qualcomm share price dropped to a 52-week low of $58 when markets were rattled from COVID-19 before it skyrocketed to a high of $161.07.

QCOM stock ended 2020 with a dividend yield of 1.77 percent, or $2.60. It raised quarterly cash dividends from $0.62 to $0.65 starting with its June dividend payment. It paid and raised this dividend consistently through the past 20 years.

The company is foundational to the 5G revolution, with chips and patents in the wireless technology giving it multi-year licensing agreements with all major smartphone manufacturers, like Apple (AAPL), Samsung, and Google (GOOG).

It beat earnings estimates throughout the 2020 fiscal year, with the fourth quarter being especially fruitful. It reported $23.5 billion in revenues for the year ($8.3 billion came in the fourth quarter). Net income for the year was $5.1, which equates to $4.52 earnings per share (EPS).

These are impressive numbers, but do they beat Marvell?

Should You Invest In Marvell?

Marvell had a market cap over $30 billion during the pandemic holiday season, with a P/E ratio just over 20x. 

A discounted cash flow analysis shows that Marvell fair market price per share is $49 per share. Prices under that threshold would signify the company is undervalued.

MRVL stock paid a 0.52 percent dividend in 2020, totaling $0.24. It paid consistently through the 2010s and 2020, but unlike Qualcomm, it never raised its dividend in that time. Dividend investors will prefer QCOM because of this.

Marvell is known as a chipmaker that holds over 10,000 patents. The more 5G equipment is deployed around the world, the more its application-specific integrated circuits (ASICs) are needed.

And major wireless technology brand Samsung partnered with Marvell for its 5G infrastructure products. The collaboration uses each company’s unique intellectual property to build an optimized MIMO network using Marvell’s Octeon and Octeon processors.

They’re also innovating new radio architectures to dramatically increase wireless computing power and bandwidth. It’s a long-term play that could make it a much more valuable stock over the next 10 years.

Of course, all stocks and investments have inherent risk.

Risks Of Buying Qualcomm Stock

Qualcomm had a great decade, but it’s facing a rough 2021 and beyond. Major tech companies, including Apple (AAPL), Google (GOOG) and Microsoft (MSFT) announced plans to create their own proprietary chips in-house. This struck a powerful blow to existing chipmakers like Qualcomm (QCOM) and Intel (INTC).

Licensing revenue from smartphone makers is the most profitable part of Qualcomm’s business, and this is going to grow. That’s because Qualcomm owns the IP for 5G chip architecture used in all the next-generation phones. This gives it a solid source of long-term profits.

In fact, Qualcomm may end up prioritizing its licensing opportunities, as Intel moves to data centers and tech companies bring manufacturing in-house.

The company faces a bevy of legal disputes, but its low P/E ratio means it has more room to grow than consumer-facing tech stocks like Amazon (AMZN) or Facebook (FB).

And Marvell faces many of the same dangers.

Dangers Of Investing In Marvell

Marvell used its increased revenues to make a $10 billion purchase. This is going to a value-add for it in the long term, but it could face a lot of short-term market scrutiny as a result. And whether it’s deserving or not, the company could find itself bundled in with other “pandemic stocks.”

When the economy reopens, tech stocks could drift downward as money flows are redirected to airlines, cruise lines, retailers, restaurants, and other stocks crippled by global stay-at-home and shutdown orders.

The combination of high spending and potentially lower revenues could choke potential profits for investors. And it pays a lower dividend than Qualcomm, which makes it a less attractive buy between the two.

Still, Marvell has plenty of gas left in its IP, and it knows how to leverage that for maximum long-term profitability. Its inflated price makes potential gains for investors jumping in now much smaller. And it is unclear how well MRVL share price will perform against the general market over the next decade.

Marvell Vs Qualcomm Stock: The Bottom Line

Qualcomm and Marvell are creating technology at the foundation of the 5G revolution. Each manufactures microchips and components, along with holding valuable patents that cover each component of the latest wireless generation.

While both grew through the pandemic, they are at risk of several market factors. For one, phone manufacturers are bringing component manufacturing in-house. And they could get caught up in a U.S. China trade war.

Risks aside, bullish analysts believe 5G is filled with profits for those involved in the infrastructure. We just don’t know yet if those gains were already built into the stocks’ trading prices.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.