QCOM: Qualcomm: Buy, Sell, or Hold?

As one of the leading wireless technology companies, the price of QUALCOMM Incorporated’s (QCOM - Get Rating) stock has more than doubled since hitting its 52-week low of $58 on March 18, 2020. As one of the frontrunners in the 5G race, QCOM provides chips to Apple Inc. (AAPL) and Samsung, among other handset makers. The stock has gained 69.4% over the past year to close yesterday’s trading session at $141.10.

With increasing use of 5G technology in several industry segments, including automobile, computing, and networking, the demand for QCOM’s products and services are expected to increase exponentially. Based on anticipated growing demand and high profitability, we expect QCOM’s shares to gallop in the coming months.

Click here to Check out the 5G Industry Report for 2021

Here’s what could drive QCOM’s performance in the near term:

Expanding Market Reach

QCOM recently expanded its reach in India, collaborating with Bharti Airtel on February 22, 2021 to accelerate 5G expansion in India. Through Airtel’s network of vendors and device partners, Airtel is expected to utilize QCOM’s 5G RAN Platforms to roll-out virtualized and Open RAN-based 5G networks.

Last month, the company’s subsidiary, Qualcomm Communications SARL, announced plans to open a new 5G research and development (R&D) center in France to work on the evolution of 5G.

And last December, QCOM and LG Uplus and LG Electronics deployed South Korea’s first 5G mmWave network using a commercial 5G smartphone at the Kumoh National Institute of Technology (KIT). On the same date, QCOM and NTT DOCOMO, INC. enabled the world’s first commercialization of 5G sub-6 GHz carrier aggregation (sub6-CA) in Japan.

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High Profitability

QCOM’s gross profit margin of 60.2% is higher than the industry average48.2%. The company also has an impressive ROE and ROA of 113.1% and 13.9%, respectively. In addition, the company’s levered free cash flow margin of 18.9% compares favorably with the industry average 11.9%.

Consistent Product Innovations

The company introduced its first augmented reality (AR) reference design based on the Qualcomm Snapdragon XR1 Platform on February 23. It is equipped to deliver high-performance, immersive experiences and lower power consumption. This month, QCOM also launched its Snapdragon X65 5G Modem-RF System–its fourth generation 5G modem-to-antenna solution.

Moreover, on January 26, 2021, QCOM announced that it is collaborating with Amazon.com, Inc. (AMZN) to pre-integrate the Alexa Custom Assistant with the Qualcomm Snapdragon Automotive Cockpit Platform.

Favorable Analyst Estimate

Analysts expect the company’s revenue to increase 46.3% for the current quarter, ending March 31, 2021, and 43.4% in fiscal 2021. QCOM’s EPS is expected to grow 89.8% for the quarter ending March 31, 2021, 74.9% for fiscal 2021 and at a rate of 24.5% per annum over the next five years.

The stock has an average broker rating of 1.52, indicating favorable analyst sentiment. Of 27 Wall Street analysts that have rated the stock, 23 have rated it Strong Buy or Buy. Wall Street analysts expect the stock to hit $172.27 in the near term, which indicates a potential upside of 25.6%.

POWR Ratings Show Promise

QCOM has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. The stock has an A grade for Growth, consistent with analyst expectations that its revenue and EPS will increase.

QCOM has a B grade for Momentum, in sync with the stock’s 79.3% gains over the past nine months and 21.7% gains over the past six months.

We have also graded QCOM for Value, Stability, Sentiment and Quality. Get all QCOM’s ratings here.

The stock is ranked #3 of 98 stocks in the A-rated Semiconductor & Wireless Chip industry.

Click here to access several other top-rated stocks in the same industry.

Bottom Line

As a frontrunner in the 5G space, we expect QCOM to witness huge demand for its products and services in the near term. As a result, we think it is wise to add the stock to one’s portfolio now.

Click here to Check out the 5G Industry Report for 2021

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QCOM shares were trading at $137.96 per share on Thursday afternoon, down $3.14 (-2.23%). Year-to-date, QCOM has declined -9.44%, versus a 2.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...