Qualcomm: 5G + Patent Portfolio = Big Upside

Summary

• Qualcomm is riding the 5G wave, and will continue to do so for some time considering the massive total addressable market.
• The company's patent portfolio gives it a unique and powerful competitive advantage.
• In this report, we review the business, the unique licensing model, the Nuvia acquisition, valuation and risks, and then conclude with our opinion on investing.

Despite the strong performance over the last year, Qualcomm (NASDAQ:QCOM) shares have a lot more upside potential ahead. Specifically, the continuing wave of 5G connectivity combined with Qualcomm’s significant competitive advantages make the shares attractive. In this report, we review the business, the unique licensing model, the Nuvia acquisition, valuation and risks, and then conclude with our opinion on investing.

Overview:

Headquartered in San Diego, California, Qualcomm is engaged in the business of providing wireless technology solutions and intellectual property. The company has 41,000 employees and nearly 13,000 customers across multiple industry verticals and 40+ countries. Qualcomm’s technologies and products are used in mobile phones, smartwatches, laptops, network equipment, automotive telematics and infotainment systems, and other IoT devices. The company’s registered trademarks include Qualcomm, Snapdragon, MSM, Hexagon, and Adreno. Qualcomm operates primarily under two operating segments, Qualcomm CDMA Technologies (“QCT”) and Qualcomm Technology Licensing (“QTL”). QCT accounts for the majority of the company’s revenue (76.6%) while QTL accounts for the majority of the profits (EBT share: 55.5%). More details about the company’s key segments are presented below:

QCT (Qualcomm CDMA Technologies): In this segment, the company sells integrated circuits and system software based on 3G, 4G, 5G or other technologies for use in IoT and other wireless connected devices such as Snapdragon platform for mobile and automotive, Hexagon^™ processors, Adreno^™ GPUs, etc. It also sells RF front-end (“RFFE”) products used in various IoT devices to reduce power consumption and to improve radio performance. The majority of QCT’s revenue comes from the sale of products used in handsets.

QTL (Qualcomm Technology Licensing): In this segment, Qualcomm derives revenue from royalties or from granting licenses and rights for use of the company’s intellectual property for manufacturing certain wireless products, including products using CDMA2000, WCDMA, CDMA TDD, LTE or OFDMA-based 5G standards and their derivatives. The segment has an

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. I have no business relationship with any company whose stock is mentioned in this article.

Left Brain Investment Research has no position in Qualcomm. However, affiliate companies Left Brain Capital Management and/or Left Brain Wealth Management are long Qualcomm (QCOM).