Qualcomm Stock To Surge Past $90 Post COVID-19 Crisis?

by Trefis Team
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Comparing the trend in Qualcomm stock (NASDAQ: QCOM) over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain around 20% once fears surrounding the coronavirus outbreak subside, to cross $90 from current levels of $79.

A detailed comparison of Qualcomm’s performance against the S&P 500 is available in our interactive dashboard analysis, 20% Gain Possible For Qualcomm Stock Post-COVID? In 2008 It Lost 18.7% And Then Gained 40.0%

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. QCOM stock lost 30% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of coronavirus cases outside China fueled concerns of a global economic slowdown. Notably though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 25% over recent weeks (vs. about 32% gain in the S&P 500) to its current level of $79.


Qualcomm’s Stock Fell Considerably Because The Situation On The Ground Has Changed

The ongoing crisis and the resulting lockdowns have had a significant impact on semiconductor and chipset manufacturing processes. The sharp reduction in the demand for mobile phones, laptops, and nearly all consumer electronics has hurt the demand for Qualcomm’s chipset products, thereby negatively impacting the company’s sales.

We believe Qualcomm’s Q3 results will confirm this reality with a drop in revenue across all segments. Signs of coronavirus containment aren’t clear, and by the Q3 earnings in July, it’s likely that QCOM stock, along with the broader market, is going to see another round of sell-offs when results confirm palpable reality.


But Qualcomm Stock Witnessed Something Similar During The 2008 Downturn

We see QCOM stock declined from levels of around $31 in October 2007 (the pre-crisis peak) to roughly $25 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 19% of its value from the S&P’s approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.
However, QCOM recovered strongly post the 2008 crisis to about $35 in early 2010 – rising by 40% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.


Will Qualcomm’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that QCOM stock fell 30% from the market peak on February 19 to the low on March 23 compared to the 19% decline during the 2008 recession, we believe it can potentially bounce back by about 50% from the low to a little over $90 once economic conditions begin to show signs of improving. This marks more than a full recovery to the $90 level Qualcomm stock was at before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting U.S. COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak impact on a diverse set of companies. The complete set of coronavirus impact and timing analyses is available here.

You can see how Covid-19 has affected Qualcomm’s semiconductor peer Texas Instruments, in our dashboard 2007-08 vs. 2020 Crisis Comparison: How Did Texas Instruments Stock Fare Compared with S&P 500?


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