QUALCOMM Incorporated (QCOM) Buy or Sell Stock Guide

Last updated: Oct 12, '19

Are you looking for the analysis of QUALCOMM Incorporated (QCOM) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 10 reasons to buy and 9 reasons to sell QCOM stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about QCOM stock:

  • Is QCOM a buy or a sell?
  • Should I sell or hold QCOM stock today?
  • Is QCOM a good buy / investment?
  • What are QCOM analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy QCOM stock:

1. Qualcomm collects royalty income on the majority of 3G and 4G handsets sold, as it holds virtually all essential patents used in these networks.

2. Barring legal or regulatory challenges, Qualcomm’s royalty revenue should grow along with the overall smartphone market, even as much of the market growth will come from entry-level phones.

3. Qualcomm is the clear market leader in wireless chips, with a leading market share position in 4G LTE chipsets and relationships with every prominent smartphone maker.

4. Qualcomm is one of the largest manufacturer of wireless chipset based on baseband technology. The company has been trying to retain its leadership in 5G, chipset market and mobile connectivity with multiple technological achievements and launches. Qualcomm, Verizon and Ericsson jointly completed the first Massive MIMO (Multiple Input-Multiple Output) trial with a fully-compatible customer device.

5. Qualcomm is very close toward its proposed acquisition of Netherlands-based mobile chipset giant NXP Semiconductors N.V. NXP Semiconductors is a leading manufacturer of high-performance, mixed-signal mobile chipsets. The company has a strong clientele serving more than 25,000 customers through its direct sales channel and global network of distribution channel partners.

6. For Qualcomm, associating with China’s leading smartphone manufacturers means additional royalties. The company has signed multiple licensing deals with various Chinese smartphone makers including Xiaomi. With these deals, Qualcomm intends to extend its pledge to constantly aid in the growth of Chinese companies and develop wireless networks, devices and applications.

7. QCOM quarterly revenue growth was 72.80%, higher than the industry and sector average revenue growth (3.52% and 3.68%, respectively). See QCOM revenue growth chart.

8. QCOM forward dividend yield is 3.10%, higher than the industry (0.53%) and sector (0.19%) forward dividend yields. See QCOM forward dividend chart.

9. QCOM PEG ratio (P/E adjusted for growth) is 0.79, and it’s low compared to its industry peers’ PEG ratios. See QCOM PEG chart.

10. QCOM average analyst rating is Buy. See QCOM analyst rating chart.

Now that you understand the bull case, let’s look at the reasons to sell QCOM stock (i.e., the bear case):

1. Qualcomm’s chip business faces a host of challenges, from share loss at Samsung and Apple, to some of its customers developing mobile processor IP and design expertise in-house, which may shrink the firm’s potential customer base.

2. Qualcomm's licensing business faces regulatory scrutiny in the U.S., Taiwan, and, most importantly, South Korea, a region whose preliminary ruling suggests that royalties should not be based on the full price of the phone.

3. Qualcomm is being sued by Apple in a case that could negatively affect the firm's licensing business.

4. Qualcomm’s first quarter fiscal 2018 and fourth quarter of fiscal 2017 GAAP and Non- GAAP results were negatively impacted by its continuous dispute with Apple and its contract manufacturers (who are Qualcomm licensees), as well as the previously disclosed dispute with another licensee.

5. Qualcomm has been facing three major problems in its business lately. Secondly, a shift in the share among OEMs (original equipment manufacturer) at the premium tier has reduced Qualcomm’s near-term opportunity to sell integrated chipsets from the Snapdragon platform. Finally, intensified competition in the Chinese market has added to the concerns.

6. The $1 billion lawsuit related to licensing royalty payments, filed by tech giant Apple Inc. (in Jan 2017) against Qualcomm with the U.S. District Court for the Southern District of California, is getting uglier day by day. Since Jan 2017, there had been a number of counter attacks from either side. Initially, Apple had accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates.

7. Aggressive competition in the mobile phone chipset market may hurt Qualcomm’s profits in the future. The company is facing severe competitive threat from its closest rival, Intel, which has been redesigning its chipsets for the mobile computing market. Intel started delivering multi-mode LTE baseband modem. Competition is also likely to emanate from formidable rivals like Broadcom and Nvidia.

8. QCOM profitability is declining. The YoY profit margin change was -32.46 percentage points. See QCOM profitability chart.

9. QCOM Price/Book ratio is 16.79, and it’s high compared to its industry peers’ P/B ratios. See QCOM forward Price/Book ratio chart.

Now let's look at the key statistics for QCOM:

Metrics QCOM
Price $77.75
Average Price Target / Upside $80.41 / 3.42%
Average Analyst Rating Buy
Industry Semiconductors
Sector Technology
Number of Employees 35,400
Market Cap $92.75B
Forward P/E Ratio 18.12
Price/Book Ratio 3.66
PEG 0.82
Revenue (TTM) $25.36B
YoY Quarterly Revenue Growth 72.8%
Profit Margin 13.67%

What are your thoughts on QCOM?

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