QCOM At Support Zone: Bargain or Bear Trap?
Qualcomm (QCOM) should be on your watchlist. Here is why – it is currently trading in the support zone ($150.96 – $166.84), levels from which it has bounced meaningfully before. In the last 10 years, the stock received buying interest at this level 6 times and subsequently went on to generate 19.3% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 11/8/2021 | 14.6% | 37 |
| 1/21/2022 | 14.1% | 12 |
| 2/15/2024 | 13.2% | 21 |
| 4/19/2024 | 44.7% | 60 |
| 8/7/2024 | 14.6% | 68 |
| 12/18/2024 | 14.9% | 49 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For QCOM Read Buy or Sell QCOM Stock to see how convincing this buy opportunity might be.
Here are some quick data points:
- Revenue Growth: 16.1% LTM and 3.1% last 3 year average.
- Cash Generation: Nearly 27.7% free cash flow margin and 27.1% operating margin LTM.
- Recent Revenue Shocks: The minimum annual revenue growth in last 3 years for QCOM was -8.4%.
- Valuation: QCOM trades at a PE multiple of 15.8
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher LTM revenue growth, and better margins
Qualcomm provides integrated circuits, system software, and licensing for 3G/4G/5G wireless technologies, supporting voice and data communications through development and commercialization of foundational wireless industry technologies.
| QCOM | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| PE Ratio | 15.8 | 23.6 |
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| LTM* Revenue Growth | 16.1% | 5.0% |
| 3Y Average Annual Revenue Growth | 3.1% | 5.8% |
| Min Annual Revenue Growth Last 3Y | -8.4% | -0.3% |
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| LTM* Operating Margin | 27.1% | 18.6% |
| 3Y Average Operating Margin | 26.9% | 17.5% |
| LTM* Free Cash Flow Margin | 27.7% | 13.0% |
*LTM: Last Twelve Months
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
What Is Stock-Specific Risk If The Market Crashes?
That said, QCOM isn’t immune to big drops. It plunged nearly 79% in the Dot-Com crash, fell about 48% during the Global Financial Crisis, and dipped around 44% in the inflation shock. Even smaller pullbacks like 2018 and the Covid pandemic wiped out over 30% each. Solid fundamentals matter, but when the market turns, QCOM can still take a heavy hit.
But the risk is not limited to major market crashes. Stocks fall even when markets are in good shape – 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 – the S&P 500, S&P mid-cap, and Russell 2000 indices. 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.