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Is Now a Good Time to Buy Qualcomm Stock?

Amit Singh - Barchart - Thu Nov 7, 8:14AM CST

Shares of the chip designer Qualcomm (QCOM) are up about 26.7% year-to-date, with yesterday's 4% rally carrying the stock's 2024 return past the S&P 500 Index’s ($SPX)24% gain. While QCOM is down 20% from its YTD highs, recent developments signal promising opportunities for investors.

Qualcomm’s latest fiscal Q4 earnings report provided a much-needed boost. The company exceeded Wall Street expectations for Q4 and delivered strong guidance for Q1, setting up QCOM stock for a broadly higher open this morning.

Besides its solid financial results, opportunities led by a shift toward on-device artificial intelligence (AI) and its tech advancements in handsets, PC, automotive, and industrial Internet of Things (IoT) provide reasons for optimism.

With the stock up more than 5% in premarket trading, let’s deep dive into Qualcomm’s recent performance and prospects to decide whether now is the right time to buy the stock.

Solid Q4 Report

Qualcomm delivered a solid fiscal fourth quarter, surpassing Wall Street’s expectations on multiple fronts. The company reported total revenue of $10.24 billion, up 19% year-over-year, exceeding the consensus estimate of $9.91 billion.

Breaking down the revenue streams:

Qualcomm CDMA Technologies (QCT): Generated $8.68 billion, surpassing the Street’s projection of $8.41 billion.
Qualcomm Technology Licensing (QTL): Posted $1.52 billion in revenue, beating analysts’ expectations of $1.45 billion.

Higher handset unit sales boosted QTL revenues, while QCT’s handset revenues of $6.1 billion met management's expectations. The company’s IoT division also showed strong growth, with $1.7 billion in revenue, up 24% from the prior quarter due to new product launches and improved inventory levels.

Qualcomm’s automotive division also set a new record for the fifth consecutive quarter, with $899 million in revenue—a 68% year-over-year increase.

Adjusted earnings per share rose 33% to $2.69, surpassing analysts’ estimate of $2.56. Qualcomm also returned $2.2 billion to shareholders through $1.3 billion in share repurchases and $947 million in dividends. The company authorized an additional $15 billion in buybacks, signaling it could continue to reward its shareholders with share repurchases.

AI: A Key Growth Catalyst for Qualcomm

As AI continues to revolutionize industries, Qualcomm is well-positioned to capitalize on the shift towards on-device AI, which is emerging as a powerful growth driver. The shift toward on-device AI—where data is processed locally—offers significant advantages like enhanced privacy, security, and faster, real-time performance. This trend is expected to spark a new era of semiconductor innovation, and Qualcomm is leading the charge in bringing AI capabilities to devices at the network’s edge.

Qualcomm’s leadership in this space is underscored by its partnerships with major tech players like Meta (META) and Amazon (AMZN). For example, Qualcomm’s Snapdragon devices support Meta’s Llama 3.2 models, enabling more advanced AI capabilities. Additionally, Qualcomm is working with Amazon to improve the integration of AI models from the cloud to edge devices, positioning itself as a key player in the AI ecosystem.

The company’s latest release, the Snapdragon 8 Elite platform, demonstrates Qualcomm’s innovation in mobile technology. The platform features the second-generation Oryon CPU and delivers a 30% performance boost while reducing power consumption by 57%. This performance leap is helping Qualcomm maintain its leadership in the market, with top-tier smartphone makers like Vivo, Xiaomi, Honor, and OPPO already adopting the Snapdragon 8 Elite for their flagship devices.

With AI at the core of its strategy, Qualcomm is well-positioned to deliver strong growth and benefit from the rapid rise of on-device AI across a wide range of industries.

Expanding Horizons: Industrial IoT and Automotive

Qualcomm is making significant strides in the industrial IoT segment with the launch of its Qualcomm IQ Series. This new suite of solutions is designed for edge computing, powering industries like robotics, drones, and computer vision applications. As industrial IoT evolves, demand for these advanced technologies is growing, positioning Qualcomm for long-term success.

The Automotive segment is another growth frontier, with the introduction of Snapdragon Cockpit Elite and Snapdragon Ride Elite platforms. These platforms support advanced digital experiences and autonomous driving functionalities, attracting notable automakers like Li Auto (LI) and Mercedes-Benz.

Positive Outlook

Qualcomm anticipates Q1 fiscal 2025 revenue between $10.5 billion and $11.3 billion, with adjusted earnings per share ranging from $2.85 to $3.05. The midpoint of both projections exceeds Wall Street estimates, signaling continued growth momentum.

Wall Street projects QCOM to post earnings of $2.86 per share on revenue of $10.6 billion in Q1 of fiscal 2025.

The Bottom Line on QCOM Stock

With strong financials, a robust AI strategy, and expanding opportunities in IoT and automotive sectors, Qualcomm is well-positioned for sustained growth. While its stock has lagged some other large-cap semiconductor stocks this year, the company’s solid fundamentals and strategic initiatives make it an attractive option for long-term investors.

Qualcomm stock has a “Moderate Buy” consensus rating on Wall Street. Analysts’ average price target for QCOM is $210.29, implying about 21.5% upside potential from current levels.

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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.