Qualcomm(NASDAQ: QCOM) stock jumped after the company delivered strong fiscal fourth-quarter results last Wednesday although it remains well off the peak it hit in June. As of this writing, the stock is up by nearly 20% year to date.
The semiconductor maker's performance has always been closely tied to conditions in the smartphone industry, and its revenue grew sharply in the quarter. It also announced a new $15 billion stock buyback program.
But now that the market has absorbed the latest news, is the stock still a good buy, or is it too late to jump on board?
Accelerating revenue
After seeing revenue growth of only 5% in its first quarter and 1% in the second quarter, Qualcomm's revenue growth accelerated in the back half of its fiscal 2024. It generated 11% revenue growth in fiscal Q3, and then posted 19% growth to $10.2 billion in the quarter that ended Sept. 29. That easily topped the $9.9 billion analyst consensus as compiled by Refinitiv.
Total chip revenue jumped 18% to $8.7 billion. Handset chip revenue in particular, which includes smartphones, rose 12% to $6.1 billion, while automotive revenue surged 68% to $899 million. Internet of Things (IoT) revenue climbed 22% to $1.7 billion.
Handset revenue was led by a 20% increase in Android revenue. Meanwhile, it was seeing good early traction for its new Snapdragon 8 Elite chip. The company is also aggressively pursuing edge device artificial intelligence (AI) opportunities by partnering with leading AI model companies to provide cloud-to-edge solutions.
In the automotive chip segment, the company said it is benefiting from more new model launches using its technology. It's finding that its shift toward digital cockpit and advanced driver assistance systems was paying off. Meanwhile, in IoT, it has benefited from new product launches and the continued normalization of channel inventory.
Revenue for its high-margin licensing segment, meanwhile, climbed 21% to $1.5 billion. Management said it completed a number of license renewals in the quarter. Adjusted EPS increased 33% to $2.69, besting analysts' consensus expectation of $2.56.
Looking ahead, Qualcomm guided for fiscal Q1 revenue in the $10.5 billion to $11.3 billion range, equating to growth of 6% to 14%. It is looking for chip revenue of between $9 billion to $9.6 billion and licensing revenue of between $1.45 billion and $1.65 billion. Adjusted EPS is projected to be in the $2.85 to $3.05 range.
Qualcomm said it is looking for mid-single-digit percentage growth in handset chip sales, propelled by demand from Chinese smartphone makers and new Android smartphone launches. It is looking for automotive segment revenue to grow by more than 50% and IoT revenue to grow by 20%, helped by consumer, industrial, and networking growth.
Is Qualcomm a buy?
Qualcomm is starting to see momentum from a smartphone sales recovery and upgrade cycle as customers look for more powerful devices that can run AI applications natively. This is also leading to consumers buying a higher mix of more advanced smartphones, which is beneficial for Qualcomm as these units often include its newer chips.
In addition to smartphones, the company is making deeper inroads into such areas as automotive, IoT, PCs (personal computers), and XR (extended reality) glasses. The launch of Copilot+ PCs looks like it should be a solid growth driver for the company, while it said its new Snapdragon X Plus 8-core chip will give it access to the $700 PC price-point market.
From a valuation standpoint, Qualcomm shares are attractively priced, trading at a forward-price-to-earnings (P/E) ratio of just over 15 based on analysts' estimates. Meanwhile, the price/earnings-to-growth (PEG) ratio is just above 0.6. Stocks with positive PEG ratios below 1 are typically viewed as undervalued; growth stocks often trade at ratios that are markedly higher.
QCOM PE Ratio (Forward) data by YCharts.
The stock is still well below its recent highs, and its revenue growth has accelerated in recent quarters. Given the combination of an attractive valuation, an improving smartphone market, and increasing opportunities in other areas, Qualcomm looks like a solid long-term option for investors to buy now, even after the post-earnings increase in its share price.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Qualcomm. The Motley Fool has a disclosure policy.
