Qualcomm Stock To 2x?

We love companies that produce cash. Lots of cash. How about 5% of market capitalization? Qualcomm stock  is worth $200 billion and produced $11.5 billion of free cash flow last year, about 5.5% of market capitalization. On a per-share basis, that’s $9 of free cash flow for a $170 stock. What’s not to love? This cash piles up on the balance sheet, can be reinvested, and fuels buybacks. Qualcomm’s cash flow margin sits at 29.3%, generating nearly $13 billion in operating cash flow over the last year. Net income? Close to $12 billion –  a roughly 27% net margin. The balance sheet is strong, with debt at less than 8% of market cap. At the same time, buybacks have been steadily shrinking the share count – down almost 30% over the last decade and about 10% since pre-Covid. See Buy Or Fear Qualcomm Stock

Image by Vlad Aivazovsky from Pixabay

Several Big Growth Drivers

So why hasn’t the stock taken off? While peers have surged on AI-drive hype, Qualcomm, which derives much of its revenue from smartphone chips and licensing, is up only 12% this year. However, the fundamentals aren’t looking too bad.  Revenue grew 16% over the last twelve months, and consensus calls for levels of about 12% growth in FY’25 led by recovery in the smartphone chipset business and higher sales of internet of things and automotive products. Combined automotive and IoT revenues reached $2.7 billion, up 23% YoY over the last quarter. There are several big growth drivers for the company in the long-run. Separately, What’s Happening With Oracle Stock?

Qualcomm is looking to move beyond being just a smartphone focused company. Management is pivoting the business so that, by the end of the decade, revenue is more evenly split between handsets and non-handsets. That means less dependence on smartphones and more exposure to higher-growth end markets, which include PCs, AI and the automotive sector.

• Automotive: Qualcomm is targeting $8 billion in revenue from automotive semiconductors by FY’29. As cars become software-defined machines, demand for chips in connectivity, driver assistance, and infotainment is expanding. Electronics now make up a growing share of vehicle costs, making semiconductors central to the future of mobility. Qualcomm already has design wins with major automakers, providing strong visibility into this ramp. Qualcomm’s edge comes from its proven connectivity and integrated chip solutions, which automakers increasingly prefer for complex vehicle systems.

• PCs: The PC market is shifting toward ARM-based architectures that promise better battery life and performance-per-watt. Qualcomm is pushing into this space with its Snapdragon X2 Elite chip, competing with Apple’s M series and x86 incumbents like Intel and AMD. The chip offers security and energy efficiency tailored for Windows laptops and desktops, with growing design wins supported by OEM partnerships and software stack optimizations. Qualcomm’s advantage lies in its ability to combine ARM architecture with optimized software, delivering superior performance-per-watt and long battery life.

• Data centers and AI: In June, Qualcomm acquired Alphawave Semi and gains critical interconnect technology and strengthens its position in energy-efficient AI CPUs. The company is targeting the massive AI inference market, where efficiency is just as important as raw compute. The hybrid processing model – splitting workloads between cloud and edge – aligns with how AI is being deployed. By integrating its CPUs with NVIDIA GPUs, Qualcomm could position itself as a key player in next-generation AI infrastructure. Qualcomm’s combination of efficient AI CPUs and interconnect technology could enable highly scalable hybrid cloud-edge solutions that maximize performance per watt.

How Qualcomm Stock Doubles

Let’s run the numbers. Qualcomm generated about $38.9 billion in revenue in FY’24, and consensus points to about $43.6 billion in sales for FY’25. While that’s pretty solid, the upside scenario is even more compelling. If revenue growth accelerates at a rate of about 15% annually, led by AI, CPU chips, and automotive, sales could reach $67 billion by 2028. Even if we hold net margins flat at about 27% (trailing 12 month levels) that’s about $18 billion in annual net income. With share repurchases likely to continue, we assume that share count could trend down toward 1 billion.

That would translate into an EPS of about $18 per share. Now let’s consider valuation. The broader semiconductor sector trades at more than 50x trailing earnings, while Qualcomm is trading at just about 16x earnings. Now, Qualcomm doesn’t need that kind of premium to re-rate meaningfully. Even a modest 20x multiple – which would reflects the potential AI growth story but still discounts the stock relative to high-flyers – implies a $360 share price. That’s more than double from today’s levels.

Qualcomm’s investment case is compelling. Strong cash generation and a solid balance sheet fund both growth initiatives and share buybacks, while diversified exposure to AI, automotive, PCs, and data centers reduces reliance on smartphones and could position the company for long-term growth. Buybacks magnify per-share earnings, with additional upside potential from an AI-driven valuation re-rating.

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