November Standout: Qualcomm (QCOM)

Qualcomm develops and markets chips for phones, networking, application processing, and more.


When we first bought Qualcomm in the low $130's earlier this year the stock provided exceptional value. Since then the stock reported earnings. QCOM moved from the $130's to the $160's and then to the $180's. With the stock up well over 35% we need to reassess what has happened and if we still think it's a good name.


Qualcomm's 4th quarter was very strong and their guidance was strong. Good start. Apple is leaning on QCOM less and less these days but Android drove a lot of revenue to them. Even with all the supply chain issues Qualcomm managed to grow revenue 43% year over year. The expectation for sales growth was somewhere in the mid 30's%. For a company of QCOM size this is a good beat. EPS and margins also expanded which was another great sign for them.


Qualcomm's automotive sector rose 44% for them from last year and their IoT (internet of things) segment grew 66% for them year over year. Those two businesses make up 3% and 20% of their overall business so that is fantastic growth in smaller areas. Their handset business is expected to be their largest driver of growth as more and more supplies adopt 5G technology but I'm excited about their Automotive and IoT divisions.


They also pay a 1.5% dividend as of today. That was closer to 2% before the earnings pop so perhaps they raise the dividend in the future if the stock can hold up.


Speaking of stock price, would I buy today and where do I think it's heading? Obviously I'm feeling good about purchasing this before the earnings move but I'm also looking to add to this position. I think it needs time to digest this big move so maybe you can get lucky and scoop shares somewhere under $160 (especially if we get a market selloff). I think the analysts are way too conservative with their price targets on this one. Most of the analysts I read recently had their targets around $175 and it looks like the average is up to $200 now which is much more appropriate. I think this is a $200 stock minimum and I think in a great environment it could be a $250 stock. So yes, it's one I want to own in a great sector despite the incredible move it's had from $60 in early 2020.