Qualcomm is set to release its Q3 FY 2024 results, with expectations of strong growth in earnings and revenue compared to last year. The company has seen a 45% rise in its stock price year-to-date, outperforming its peers in the semiconductor industry. Factors such as a recovery in the smartphone market and the growing trend of generative artificial intelligence are driving the recent gains for Qualcomm. The company’s CDMA Technologies segment, which sells application processors, modems, and software for mobile devices, is benefiting from higher demand worldwide, especially in China. Qualcomm’s high-end chipsets optimized for AI, such as the Snapdragon 8 Gen 3, are also seeing increased traction in the market, particularly in the PC segment where vendors are deploying AI features into computers.
The automotive business of Qualcomm is also performing well, as semiconductors play a larger role in the transportation industry with trends like electrification and autonomous driving gaining momentum. The company’s automotive revenues rose significantly in Q2 FY 2024, indicating market share gains and a strong position for future growth. Despite the recent slowdown in car sales and the EV industry, Qualcomm remains on track for over $4 billion in automotive revenue by FY 2026. The optimism surrounding artificial intelligence and Qualcomm’s automotive business has driven its stock up, although the stock’s performance has been inconsistent over the past few years.
The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period, providing better returns with less risk compared to the benchmark index. As the macroeconomic environment remains uncertain with high oil prices and elevated interest rates, there are concerns about Qualcomm facing a similar situation as in 2021 and 2022, where it underperformed the S&P 500. Qualcomm’s stock currently trades at around $204 per share, with a multiple of about 21x consensus FY 2024 earnings. Competition in the mobile chipset space is increasing, with companies like Huawei and Samsung developing their own processors, potentially impacting Qualcomm’s sales.
Analysts have a price estimate of $189 for Qualcomm, which is 9% below the current market price of $210. The analysis of Qualcomm’s valuation raises questions about whether the stock is expensive or cheap at its current price. Investors are advised to consider the competitive landscape in the semiconductor industry and the potential impact on Qualcomm’s sales in the future. Overall, Qualcomm’s upcoming earnings report and future performance will be closely watched to assess the company’s growth prospects amidst increasing competition and market trends.
