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Qualcomm: 5G And Wi-Fi 6E Will Be The Drivers Of Growth

May 05, 2020 10:03 AM ETQUALCOMM Incorporated (QCOM)8 Comments
Alberto Wallis profile picture
Alberto Wallis


  • QCOM is down 14% YTD, while the Nasdaq 100 is flat.
  • Q2 earnings were solid but not noteworthy.
  • 5G and WiFi 6E will be the medium and long term drivers for QCOM.
  • Current dividend yield of 3.44% may be attractive to investors.

Qualcomm Inc. (NASDAQ:QCOM) stock has been hit hard by the coronavirus pandemic. The stock is down 14% YTD, versus the Nasdaq 100 Index that's flat for the year. Since I don't expect QCOM will be affected by the pandemic or the upcoming recession more than the average company, and considering that they still have potential for growth in the long term, I believe this is a great opportunity to buy the company at a discount.

Earnings Highlights

Last week, Qualcomm announced their FY 2020 Q2 results. QCT, their semiconductor segment, reported revenues of $4.1B (+10% YoY) and EBT of $667M (+23%), but had a decrease in the number of MSM units sold (129M, -17%). Meanwhile their licensing business, QTL, reported revenues of $1.07B (-4% YoY) and EBT of $671M.

According to management, their results were negatively affected by a 21% YoY reduction in the demand for 3G/4G/5G handsets, due to the coronavirus pandemic. However, the pandemic also highlighted the importance of broadband in facilitating remote work, entertainment, education, telemedicine, and others.

For their QTL segments, the company reported they have now 85 5G license agreements, up 5 from last quarter. Of note are their long-term deals with OPPO and Vivo to cover 5G multi-mode mobile devices. They are still in discussions with Huawei, and the result of these discussions will surely have an impact on QCOM's stock price.

Many semiconductor companies reported steady demand in Q1/Q2 due to inventory accumulation from OEM's in case of a future disruption of supply chains. One analyst asked if this was the case too with Qualcomm, and the answer was very positive:

Well, I mean, we obviously spend a lot of time looking at the sell-in of chipsets versus the device sales and matching them and getting a sense of how the inventory profile is shaping

This article was written by

Alberto Wallis profile picture
Financial Analyst at Fincredible. I'm focused on finding quality growth stocks with significant potential for outperformance. I look for companies with sound business models and economic advantages that can deliver strong results over the long term. I studied Economics at the Universidad Metropolitana in Venezuela, and I'm currently pursuing a Master's Degree in Finance com IESA Business School.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (8)

I like Qualcomm and note that IOT will be the big growth driver. On a side note I get 100 Mbs from T-MOBILE on LTE but only from a small number of towers. In my area bandwidth is mostly 5-10 and under (LTE). I suspect LTE was never finished and the 5G build will take a long time.
QCOM was bid $117B by Broadcom when 5G was not in play and Apple was litigating. Now both issues settled in QCOM favor yet it is currently trading at ~ $85B. The market signal is that it is worth at least $117B for their one of a kind unique assets which are the building blocks of tomorrows society, hence the present price represents a great opportunity to buy.
The signal was $117B relatively to the overall state of the market at the time. The market is in an entirely different state now.
We have heard of other potential growth areas for QCOM, such as edge computing and artificial intelligence (AI), etc...?
Can you shed more light on these areas of growth and how it positions the company going forward....?
Leo529 profile picture
Knowing a thing or two in this domain- they’re trying really hard to scale up to NVDA graphic chip for AI, BUT the hardware is lacking heavily behind NVDA and it will not be enough for on-board AI. their target is, well, we all know where but it is too weak. I like QCOM btw, but biz is biz.
Alberto Wallis profile picture
Qualcomm has been working for several years in solutions for AI, IoT and Edge computing, mainly working on power efficiency, which is one of the main problems when dealing with these technologies. Last month (www.qualcomm.com/...) they announced their new NB2 IoT modem, which they claim is the most Power-Efficient in the world. Since power efficiency is of great importante in IoT devices, sensors, etc., this is great news.

Just yesterday, they open sourced their AI Model Efficiency Toolkit (www.qualcomm.com/...) to collaborate with other AI researchers in developing more efficient processes that spend less energy.

Also, they have included AI capabilities on devices with the Snapdragon 660 or above (www.qualcomm.com/...), and will surely continue to improve their SoC to provide more AI and Edge computing capabilities.

So they are clearly working on these areas, and have made improvements in their current products to include these new technologies. I´m sure the growth of AI, Edge Computing and IoT will be huge in the coming years, so the opportunity will be there for QCOM, but I believe it's to early to know if they will come out as "winners".
05 May 2020
The problem is China, where a lot of revenues come from. Since a big fight between US and China is in the brewing, and as author said "there is not much upside in the short term" I'd rather wait right now.
a company to keep an eye on that's for sure
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