Qualcomm Stock Delivers Strong Cash Yield – Upside Ahead?
Qualcomm (QCOM) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market
What Is Happening With QCOM
QCOM stock is currently trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also below its 3-year average.
The stock may not reflect it yet, but here is what’s going well for the company. Despite near-term handset revenue headwinds from memory supply constraints impacting Q2 FY26 guidance, Qualcomm’s automotive sector delivered $1.1 billion in Q1 FY26 revenue, up 15% year-over-year. Key deals include a long-term Volkswagen Group supply agreement for Snapdragon Digital Chassis starting in 2027 and expanded collaboration with Google for AI-powered mobility. The Snapdragon X series in premium Windows laptops also captured over 10% share of the >$800 segment.
QCOM Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 8.6%, but Qualcomm stock does
- Strong Margin: Last 12 month operating margin of 27.2%
- Growth: Last 12 revenue growth of 10.3% – low growth, but this selection is all about high yield and margin
- Valuation: QCOM stock currently trading at 36% below 2Y high, 17% below 1M high, and at a PS lower than 3Y average.
Below is a quick comparison of QCOM fundamentals with S&P medians.
| QCOM | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| Free Cash Flow Yield | 8.6% | 4.0% |
| Revenue Growth LTM | 10.3% | 6.4% |
| Revenue Growth 3YAVG | 2.3% | 5.6% |
| Operating Margin LTM | 27.2% | 18.8% |
| Operating Margin 3YAVG | 26.1% | 18.4% |
| PE Ratio | 28.1 | 25.0 |
*LTM: Last Twelve Months
But What Is The Risk Involved?
While QCOM stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. QCOM plunged nearly 79% in the Dot-Com Bubble, took a hit of 48% during the Global Financial Crisis, and dropped about 44% in the recent inflation shock. Even the less severe events — like the 2018 Correction and the Covid selloff — dragged the stock down over 33% and 36%, respectively. Strong fundamentals matter, but sharp market selloffs still push down even solid names hard. 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.
For more details and our view, see Buy or Sell QCOM Stock.
Stocks Like QCOM
Not ready to act on QCOM? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few year average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Strategy consistent across market cycles
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