Thursday, February 29, 2024
HomeFinanceQualcomm's Bright Future Just Got Extended, Right At Resistance

Qualcomm’s Bright Future Just Got Extended, Right At Resistance

Key points

  • Qualcomm stock has been hit for unjustifiable reasons, creating an opportunity for the high-value investor.
  • You may understand why a small amount of growth can go a long way in other areas by breaking down the strengths of the business.
  • This new deal, which represents more than a small part, could be the difference in massive returns.
  • 5 stocks we like more than Apple

So look, don’t beat around the bush this time; When a high-quality asset (a business in this case) goes on sale because outside forces have weighed in the past the profitable realities of such a stand, you must focus on your screen and dig up the facts to make an informed investment decision. .

You’ve decided to come to the right place, so MarketBeat has given you enough research time savings so you can put more thought into buying or getting into selling. Today, the case study falls on Qualcomm NASDAQ:QCOMa well-known name with a beaten stock price.

With a brief lesson on value investing and deal negotiation, you will gain enough information to consider the vitality of allocating some of your hard-earned money to this name and familiarizing yourself with this stock.

Bring the protein

Plain and simple, this stock is trading at a 20% discount from its 52-week high. Wall Street’s definition of a bear market is simply this: a 20% drop from recent (or all-time) highs, first initial check once the stock chart opens, done.

Why have stocks fallen so much? A valid concern may begin to raise doubts about the stability of the business, although these can be quickly dismissed.

According to industry readings from the US ISM Manufacturing PMI reports, the computer electronics industry has been in a nearly twelve-month contraction. This explains the slowdown across the sector, excusing some – if not all – of the financial contractions seen in Qualcomm’s numbers.

Bigger and more established names like Apple NASDAQ:AAPL have been affected by this drop in demand, as America’s favorite electronics brand reported a roughly 40% decline in personal computer shipments this year.

So things aren’t necessarily blowing up inside Qualcomm headquarters; Instead, the entire industry is in trouble and stock prices are going down all together, but does the market agree with this assumption?

Analysts have set a consensus price target of $142.6 per share for Qualcomm shares, which directly implies an upside of 28.0% from current prices. Analysts, who live and breathe the companies they cover, would be anything but optimistic if there were any real problems.

Indeed, the company’s financials will reveal the platform upon which a massive deal can generate momentum for enormous growth opportunities, but more on that later; For now, focus on the following key metrics.

Gross margins have exceeded 55% year over year, which may be a sign of pricing power or some other form of product moat. On a net income margin basis, this rate barely falls below 22%, an astonishing profitability rate for any industry.

So it’s a well-run money pumper, but is it good enough for your money? Some will suggest yes.

Brilliant Future

Achieving (and maintaining) good margins is only part of the game; With all the extra money out there, management has to be efficient enough to put it in the right places. You can use the ROIC (return on invested capital) metric to dig deeper into this.

Qualcomm’s ROIC has hovered between 20% and 30% on a five-year average, which is a huge rate of return, enough to make even the greediest value investors out there.

All things being equal, stock prices should reflect ROIC levels in their long-term annual appreciation, and compounding money at rates above 20% sounds good even when inflation is soaring.

Why is all this critical, past performance information and all that? You can safely assume that any incremental dollar of revenue coming into this business will not only retain 22% or more, but that this surplus will be managed wisely.

The time had come to figure out where all this additional income would come from, and it turned out to be a place that most bulls had given up on, one that the bears never counted on returning to.

Qualcomm has renewed its relationship with Apple, agreeing to be the exclusive supplier of Snapdragon 5G chips for smartphones. This reiterates Qualcomm’s positioning as a leader in 5G technology, a moat that cannot be put a price on.

Analysts only expect earnings per share to rise 11.5% over the next twelve months, a projection that may still need to reflect the upside potential this renewed contract may bring. Remember, every dollar of additional revenue contributes greatly to Qualcomm’s bottom line.

Consider that this huge tailwind could be reflected in the next quarterly earnings report. With the stock trading at the lowest P/E multiples in over 5 years (ex. COVID), ducks are lining up for a potential buyout on this tremendous deal.

Before you consider Apple, you’ll want to hear this.

MarketBeat daily tracks Wall Street’s top-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and Apple wasn’t on the list.

While Apple currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

See all five stocks here

7 Energy Stocks to Buy and Hold Forever

Do you expect global energy demand to reduce? If not, it’s time to look at how energy stocks can play a role in your portfolio.

Get this free report

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments