Qualcomm (QCOM) stock has been on a run of late, up around 47% since its mid-October bottom, thanks in part to a stronger-than-expected quarter that crushed expectations.
Shares of the semiconductor and wireless connectivity kingpin are near a fresh all-time high. However, its performance for the year is still relatively modest, up just over 21% year-to-date, making the name a compelling catch-up trade for the new year, as the firm looks to continue dodging and weaving past supply chain challenges.
At 23.4 times trailing earnings and 6.3 times sales, Qualcomm looks like a relative bargain in an otherwise expensive corner of the market. With an attractive multiple and newfound strength in the face of a more challenging environment, I remain bullish on the stock. (See Analysts’ Top Stocks on TipRanks)
Qualcomm: Still Cheap
With an outstanding 43% in year-over-year revenue growth in the face of unprecedented COVID disruptions, it's a mistake to count management out, even in the face of significant headwinds.
Even if the Omicron variant causes further disruptions over the coming weeks and months, Qualcomm is in great shape to continue swimming forward, even as the tide continues moving against it.
Don't Discount Qualcomm's Diversification Efforts
Qualcomm is primarily a wireless tech titan today. That said, it could evolve to become a more influential player in other emerging, innovative fields in a few years down the road. IoT (Internet of Things), automotive, gaming and even the metaverse are key arenas in which Qualcomm can thrive.
Indeed, Qualcomm made clear of its intent to better diversify its business in its most recent Investor Day. Management seemed pretty confident in its future, even with Apple (AAPL) incorporating its own modem in a few years from now.
Qualcomm is no Intel (INTC). It can move on from Apple with what I believe is a clearer path forward. If anything, less reliance on Apple (Qualcomm is to supply modems to only 20% of 2023 model iPhones) could be a good thing, and a considerable amount of margin expansion could be in store for the more diversified version of Qualcomm.
In the meantime, the company is poised to continue generating ample amounts of cash flow from continued strength in 5G. Such strength isn't going away anytime soon, especially as the broader economic reopening continues.
Qualcomm: Another Incredible Quarter in the Books
Qualcomm knocked one out of the ballpark with its fourth-quarter numbers. Revenue came in at $9.3 billion (up 43% year-over-year), with per-share earnings of $2.55, beating the consensus estimate of $2.26. The company managed to beat management's own guidance on the high end, thanks in part to remarkable strength in 5G.
IoT revenues skyrocketed an incredible 66% year-over-year, thanks in part to robust demand for a wide range of hardware. Today, IoT revenues of $1.6 billion are quite modest, but look for it to continue picking up traction, as demand for a wide range of chips is likely to increase.
Wall Street's Take
According to TipRanks’ analyst rating consensus, QCOM stock comes in as a Moderate Buy. Out of 21 analyst ratings, there are 12 Buy recommendations and nine Hold recommendations.
The average Qualcomm price target is $193.78. Analyst price targets range from a low of $150 per share to a high of $225 per share.
Bottom Line on Qualcomm Stock
In a nutshell, Qualcomm had another spectacular quarter. The positive post-earnings reaction was warranted, and may set the stage for a more pronounced rally to even higher levels.
It wasn't just another solid quarter that should have investors bullish. The company's push to diversify is worth getting behind, especially at today's modest multiples.
Further, I think the firm can outpace broader markets in the new year, even in the face of Omicron-induced disruptions. The company has already demonstrated its resilience over the past year and a half, after all.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
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