Time to buy Qualcomm stock?

We believe there is not much to fear in QCOM stock given its overall Strong operating performance and financial condition. Considering stock’s Moderate valuation, we think it is Attractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $170 Bil in market cap, Qualcomm provides foundational wireless technologies, integrated circuits, system software, and licenses for 3G/4G/5G communications across multiple business segments.

[1] Valuation Looks Moderate

This table highlights how QCOM is valued vs broader market. For more details see: QCOM Valuation Ratios

[2] Growth Is Moderate

• Qualcomm has seen its top line grow at an average rate of 3.1% over the last 3 years
• Its revenues have grown 16% from $36 Bil to $42 Bil in the last 12 months
• Also, its quarterly revenues grew 16.9% to $11 Bil in the most recent quarter from $9.4 Bil a year ago.

This table highlights how QCOM is growing vs broader market.

[3] Profitability Appears Very Strong

• QCOM last 12 month operating income was $11 Bil representing operating margin of 27.1%
• With cash flow margin of 30.4%, it generated nearly $13 Bil in operating cash flow over this period
• For the same period, QCOM generated nearly $11 Bil in net income, suggesting net margin of about 26.1%

This table highlights how QCOM profitability vs broader market. For more details see: QCOM Operating Income Comparison

[4] Financial Stability Looks Very Strong

• QCOM Debt was $15 Bil at the end of the most recent quarter, while its current Market Cap is $170 Bil. This implies Debt-to-Equity Ratio of 8.6%
• QCOM Cash (including cash equivalents) makes up $14 Bil of $55 Bil in total Assets. This yields a Cash-to-Assets Ratio of 25.0%

[4] Downturn Resilience Is Moderate

QCOM saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• QCOM stock fell 45.1% from a high of $189.28 on 15 December 2021 to $103.88 on 3 November 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 May 2024
• Since then, the stock increased to a high of $227.09 on 19 June 2024 , and currently trades at $153.73

 
2020 Covid Pandemic

• QCOM stock fell 36.5% from a high of $95.91 on 17 January 2020 to $60.91 on 20 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 30 July 2020

 
2008 Global Financial Crisis

• QCOM stock fell 48.2% from a high of $56.37 on 15 August 2008 to $29.21 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 February 2011

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read QCOM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.