S&P 500   4,996.13 (+0.58%)
DOW   38,161.73 (+0.46%)
QQQ   416.56 (+0.46%)
AAPL   165.53 (+0.32%)
MSFT   398.51 (-0.15%)
META   479.13 (-0.40%)
GOOGL   155.95 (+1.21%)
AMZN   175.22 (+0.34%)
TSLA   141.88 (-3.52%)
NVDA   784.19 (+2.91%)
AMD   147.11 (+0.32%)
NIO   3.92 (+3.16%)
BABA   70.18 (+1.61%)
T   16.23 (-1.70%)
F   12.75 (+5.02%)
MU   108.15 (+1.29%)
GE   149.99 (+1.30%)
CGC   7.84 (-1.13%)
DIS   112.24 (-0.33%)
AMC   3.44 (+8.86%)
PFE   26.31 (+1.19%)
PYPL   62.89 (+0.93%)
XOM   120.70 (+0.68%)
S&P 500   4,996.13 (+0.58%)
DOW   38,161.73 (+0.46%)
QQQ   416.56 (+0.46%)
AAPL   165.53 (+0.32%)
MSFT   398.51 (-0.15%)
META   479.13 (-0.40%)
GOOGL   155.95 (+1.21%)
AMZN   175.22 (+0.34%)
TSLA   141.88 (-3.52%)
NVDA   784.19 (+2.91%)
AMD   147.11 (+0.32%)
NIO   3.92 (+3.16%)
BABA   70.18 (+1.61%)
T   16.23 (-1.70%)
F   12.75 (+5.02%)
MU   108.15 (+1.29%)
GE   149.99 (+1.30%)
CGC   7.84 (-1.13%)
DIS   112.24 (-0.33%)
AMC   3.44 (+8.86%)
PFE   26.31 (+1.19%)
PYPL   62.89 (+0.93%)
XOM   120.70 (+0.68%)
S&P 500   4,996.13 (+0.58%)
DOW   38,161.73 (+0.46%)
QQQ   416.56 (+0.46%)
AAPL   165.53 (+0.32%)
MSFT   398.51 (-0.15%)
META   479.13 (-0.40%)
GOOGL   155.95 (+1.21%)
AMZN   175.22 (+0.34%)
TSLA   141.88 (-3.52%)
NVDA   784.19 (+2.91%)
AMD   147.11 (+0.32%)
NIO   3.92 (+3.16%)
BABA   70.18 (+1.61%)
T   16.23 (-1.70%)
F   12.75 (+5.02%)
MU   108.15 (+1.29%)
GE   149.99 (+1.30%)
CGC   7.84 (-1.13%)
DIS   112.24 (-0.33%)
AMC   3.44 (+8.86%)
PFE   26.31 (+1.19%)
PYPL   62.89 (+0.93%)
XOM   120.70 (+0.68%)
S&P 500   4,996.13 (+0.58%)
DOW   38,161.73 (+0.46%)
QQQ   416.56 (+0.46%)
AAPL   165.53 (+0.32%)
MSFT   398.51 (-0.15%)
META   479.13 (-0.40%)
GOOGL   155.95 (+1.21%)
AMZN   175.22 (+0.34%)
TSLA   141.88 (-3.52%)
NVDA   784.19 (+2.91%)
AMD   147.11 (+0.32%)
NIO   3.92 (+3.16%)
BABA   70.18 (+1.61%)
T   16.23 (-1.70%)
F   12.75 (+5.02%)
MU   108.15 (+1.29%)
GE   149.99 (+1.30%)
CGC   7.84 (-1.13%)
DIS   112.24 (-0.33%)
AMC   3.44 (+8.86%)
PFE   26.31 (+1.19%)
PYPL   62.89 (+0.93%)
XOM   120.70 (+0.68%)

Qualcomm's Bright Future Just Got Extended, Right At Resistance

Qualcomm stock

Key Points

  • Qualcomm stock has been beaten up for unjustifiable reasons, creating an opportunity for the acute value investor.
  • You may understand why a tiny bit of growth can go a long way in other areas by breaking down the business's strong suites.
  • Representing more than a tiny bit, this new deal could be the difference maker for massive returns.
  • 5 stocks we like better than Apple

So look, no beating around the bush this time; when a high-quality asset (a business in this case) goes on sale because of outside forces weighing in the past the profitable realities of such support, you should be honing into your screen and digging out the facts to make an educated investment decision.

You have decided to come to the right place, which is why MarketBeat has provided you with enough time savings on research so you can think more about buying or getting busy selling. Today, the case study falls on Qualcomm NASDAQ: QCOM, a well-known name with a beaten-up stock price.

With a brief lesson on value investing and deal-making, you will walk away with enough information to consider the vitality of allocating some of your hard-earned dollars to this name and get yourself acquainted with this stock.

Bring in the Protein

Plain and simple, this stock is trading at a 20% discount from its 52-week high. Wall Street's definition of a bear market is just this: a 20% decline from recent (or all-time) highs, first initial check once you open up the stock chart, done.

Why has the stock been falling this much? A valid concern may start to brew questions around the stability of the business, though these can be dismissed shortly.

According to industry readings from the United States ISM manufacturing PMI reports, the computer electronics industry has been on a near twelve-month contraction. This explains the slowdowns across the entire sector, excusing some - if not all - of the financial contractions seen in Qualcomm's figures.


Bigger, more established names like Apple NASDAQ: AAPL have been affected by this demand downturn, as America's favorite electronics brand reported a roughly 40% decline in personal computer shipments this year.

So, things are not necessarily blowing up inside Qualcomm's headquarters; instead, the entire industry is in trouble, and stock prices are all headed down together, but does the market agree with this assumption? 

Analysts have placed a consensus price target of $142.6 a share for Qualcomm stock, which directly implies a 28.0% upside from today's prices. Analysts, who live and breathe the companies they cover, would not be bullish at all if there were any real trouble.

In fact, the company's financials will reveal the platform upon which a massive deal can build momentum for tremendous growth opportunities, but more on this later; for now, focus on the following key metrics.

Gross margins have been over 55% year after year, which can be a sign of pricing power or some other form of product moat. On a net income margin basis, this rate hardly dips below 22%, an astonishing rate of profitability for any industry.

So it's a well-managed money-pumping machine, but is it good enough for your money? Some will suggest it is.

Bright Future

Making - and maintaining - good margins is only part of the game; with all the extra money lying around, management has to be efficient enough to put it in the right places. You can use the ROIC (return on invested capital) metric to dig deeper into this.

Qualcomm's ROIC has hovered around 20-30% on a five-year average basis, which is a massive rate of return enough to call even the greediest value investors out there.

All else being equal, stock prices should reflect ROIC levels in their annual appreciation over the long run, and compounding money at rates above 20% sounds good even when inflation is running wild.

Why is all of this critical, information from past performance and all? You can safely assume that any incremental dollar of revenue that comes into this business will not only retain 22% or more but that this leftover will be wisely managed.

It was time to find out where all of this additional revenue would be coming from, and it turned out to be a place most bulls had given up on, one that bears were never counting on coming back.

Qualcomm has renewed its relationship with Apple, agreeing to be the exclusive supplier of Snapdragon 5G chips for smartphones. This reiterates Qualcomm's positioning as a leader in 5G technology, a moat you cannot put a price on.

Analysts only see earnings per share jumping by 11.5% for the next twelve months, a projection that may still need to reflect the potential upside this renewed contract may bring. Remember, each dollar of additional revenue goes a long way in Qualcomm's bottom line.

Considering this massive tailwind could be reflected in the coming quarterly earnings report. The stock trading the lowest P/E multiples in more than 5 years (ex. COVID), the ducks are in a row for potential purchase in this tremendous deal.

Should you invest $1,000 in Apple right now?

Before you consider Apple, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Apple wasn't on the list.

While Apple currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

7 AI Stocks to Invest In: An Introduction to AI Investing For Self-Directed Investors Cover

As the AI market heats up, investors who have a vision for artificial intelligence have the potential to see real returns. Learn about the industry as a whole as well as seven companies that are getting work done with the power of AI.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
QUALCOMM (QCOM)
4.7843 of 5 stars
$158.99+0.9%2.01%23.04Moderate Buy$156.90
Apple (AAPL)
4.8549 of 5 stars
$165.53+0.3%0.58%25.78Moderate Buy$203.34
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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