Qualcomm Stock Is Down More Than 35% From Its High. Is The Stock a Buy?
Shares of Qualcomm (QCOM +6.11%) fell about 10% after the company reported fiscal fourth-quarter results last week. The stock now trades roughly 36% below its 52-week high. Investors focused on the shrinking smartphone business. On the other hand, nearly everything else Qualcomm does is growing fast, and there are reasons to be optimistic for the future.
Is Qualcomm stock a buy now? Here’s a look at the company’s latest results, good and bad, and why Qualcomm could be worth a closer look right now.
Image source: Getty Images.
The phone problem
Qualcomm’s revenue fell 8% year over year in the quarter to $10.32 billion, and adjusted earnings per share fell 28% to $2.17, just above analysts’ estimates. The biggest drag was handsets, where revenue dropped 26% to $5.14 billion.
Two issues are weighing on that business. First, Apple (AAPL +2.51%) is replacing Qualcomm’s modems with its own chips, and rising memory prices are making phones more expensive to build. Management said it’s raising prices to offset higher chip costs and expects global handset sales to be flat to down in 2027. The midpoint of its earnings guidance for the current quarter also came in a bit below analysts’ expectations.
Everything else is accelerating
Automotive revenue jumped 89% to $1.99 billion, and management said autos exited the fiscal year at an $8 billion annual run rate, $1 billion ahead of its own expectations.
QCOM – Qualcomm
$175.51+$10.10 (+6.11%)
NASDAQ · As of 11:04 AM ET 11/09/26
Data centers are the newest piece and, for now, a relatively small part of the business. Qualcomm expects more than $650 million of data center revenue this quarter and reiterated its target of $5 billion for fiscal 2027. The company also announced a multi-generation deal with Amazon (AMZN +3.71%) covering custom chips for AI inference and optical connectivity. Management said the deal has the potential to generate up to $60 billion in revenue over the next 10 years. Add in a new deal to supply SpaceX‘s (SPCX +6.24%) planned cellular network, which could provide a multi-year tailwind, and there’s a lot to like about Qualcomm growth potential outside of handsets for the next couple of fiscal years at a minimum.
Is it a buy?
After the post-earnings drop, Qualcomm trades for about 18 times forward earnings. It pays a $0.92 quarterly dividend, which works out to about a 2% yield, and it spent about $2 billion on buybacks and dividends last quarter alone.
To be sure, handsets still account for about half of Qualcomm’s revenue, and that business is likely to remain under pressure through 2027. The data center business is also a bit of a question mark regarding its future potential. Going from about $650 million in one quarter (about $2.6 billion annualized) to $5 billion in a year is a steep ramp, and the Amazon figure is a potential total over a decade, not a guarantee.
Having said all that, the market is pricing Qualcomm as if it’s still just a smartphone chipmaker. If autos, data centers, and the Internet of Things keep growing at anything close to their current pace, they’ll make up the majority of Qualcomm’s growth over the next few years. For patient investors who want a dividend while they wait, the sell-off could be an interesting entry point.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.