Based in San Diego, California, QUALCOMM Incorporated (QCOM) has transformed the world in a big way with its advanced technologies. Operating in China, South Korea, Taiwan, and the United States, QCOM designs and manufactures semiconductors and wireless telecommunications products. It has three main business units — Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI).

On a year-to-date basis, QCOM has rallied 58.8% to close yesterday’s session at $147.69. During the past three months, QCOM soared 31.7%. QCOM also invests heavily in promising startups. The company’s growth was boosted by the 5G revolution. This impressive performance and potential upside based on a number of factors have helped the stock earn a “Strong Buy” rating in our proprietary ratings system.

Here is how our proprietary POWR Ratings system evaluates QCOM:

Trade Grade: A

QCOM is currently trading above its 50-day and 200-day moving averages of $125.25 and $103.27, respectively, indicating an uptrend. Moreover, QCOM has gained 73.9% over the past six months, reflecting solid short-term bullishness.

QCOM’s total revenues increased 35% year-over-year to $6,502 million for the fiscal fourth quarter that ended September 2020. This impressive revenue performance was primarily driven by the company’s investments in 5G. QCOM’s Non-GAAP net income increased 76% year-over-year to $1.7 billion. EPS increased 86% year-over-year to $1.45.

Qualcomm Ventures has invested more than $170 million in the global 5G ecosystem. On November 10^th, Qualcomm Ventures announced new investments in Celona, Cellwize, Azion, and Pensando, to accelerate the growth of 5G. Last month, QCOM unveiled the Qualcomm Immersive Home Platforms, which integrates high powered Wi-Fi 6 and 6E.

On October 20^th, Verizon (VZ), Ericsson (ERIC), and QCOM became the first in the world to achieve 5G peak speed of 5.06 Gbps. The company also teamed up with Reliance Jio Platforms to fast track the development of 5G solutions in India with a virtualized RAN.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, QCOM is pretty well positioned. The stock is currently trading just 1.2% below its 52-week high of $149.41, which it hit on November 9^th.

The company’s net revenue grew at a CAGR of 1.9% over the past three years, while EBITDA increased at a CAGR of 8% over the same time period. Also, EPS increased at a CAGR of 40.2% over the past three years. This can be attributed to the consistent developments made by the company and its tie-ups with several companies.

Peer Grade: A

QCOM is currently ranked #3 out of 86 stocks in the Semiconductor & Wireless Chip industry. Other popular stocks in the industry are Taiwan Semiconductor Manufacturing Company Ltd. (TSM), Texas Instruments Incorporated (TXN), and NXP Semiconductors N.V. (NXPI).

QCOM gained 58.8% year-to-date, beating 50.9%, 18.1%, and 10.2% returns of TSM, TXN, and NXPI, respectively.

Industry Rank: A

The Semiconductor & Wireless Chip industry is ranked #10 out of the 123 StockNews.com industries. This industry is known for working behind the scenes making chips, which are used in many technology products, especially in the computer industry and the telecommunications industry. With the ongoing rapid digitalization, the market demand for advanced technologies is more now than ever. With the 5G revolution just having started, the industry is expected to grow exponentially in the upcoming years.

Overall POWR Rating: A (Strong Buy)

QCOM is rated a “Strong Buy” due to its short-and-long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our POWR Ratings system.

Bottom Line

QCOM has the potential to soar in the upcoming months despite gaining 58.8% so far this year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for QCOM. It has an average broker rating of 1.38, indicating favorable analyst sentiment. Of the 26 Wall Street analysts that cover the stock, 19 rate it a “Strong Buy.” Moreover, QCOM has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $8.23 billion for the quarter ending December 2020 indicates 62.7% growth from the same period last year. Its EPS is expected to grow 10.5% next year. This outlook should keep QCOM’s price momentum alive in the near term.

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QCOM shares were trading at $145.52 per share on Thursday afternoon, down $2.17 (-1.47%). Year-to-date, QCOM has gained 68.43%, versus a 11.96% 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...

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