Entering text into the input field will update the search result below

Qualcomm: Damn The Torpedoes, Full Speed Ahead

Apr. 10, 2021 5:44 AM ETQUALCOMM Incorporated (QCOM)61 Comments


  • A variety of concerns pushed the shares well below the sector’s valuations.
  • However, 5G and other high-growth arenas should push the shares higher.
  • Meanwhile, Qualcomm will reap billions in royalties from rivals.

Latest Consumer Technology Products On Display At CES 2017
Photo by Ethan Miller/Getty Images News via Getty Images

A good argument can be made that Qualcomm Incorporated (NASDAQ:QCOM) shares are undervalued. Then again, perhaps there are reasons QCOM trades among the bottom dwellers in the tech industry.


This article was written by

Chuck Walston profile picture

Chuck Walston is a U.S. Army veteran and a retired law enforcement officer with approximately 20 years of experience as a retail investor. He focuses on dividend stocks and concentrates on companies with competitive advantages and strong balance sheets.

Chuck is a contributing author for the investing group The Dividend Kings which focuses on helping investors safeguard and grow their money in all market conditions through the highest-quality dividend investments. Features include: 13 model portfolios, buy ideas, company research reports, and a thriving chat community for readers looking to learn how to invest more intelligently in dividend stocks. Learn More.

Analyst’s Disclosure: I am/we are long QCOM. 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.

I have no formal training in investing. All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. All relevant risks are not covered in this article. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (61)

Bin there dun that profile picture
$QCOM is on sale today.
cyrano13 profile picture
Sorry I fast fingered @Downtown10
cyrano13 profile picture
It's all about the forecast Nasdaq survey of analysts on earnings is lukewarm.
I am waiting to see what QCOM's forecast is on earnings conference call.
Flex68 profile picture
I used to be in-and-out of MU pretty frequently, back when I felt I was able to 'judge' cyclical movements.

Over the past few years , tho , I've found that I prefer investing in AVGO compared to AMD, MU, TSM, etc.

The chipset mfgs have also delivered very nicely , and I am certainly not believing, or insinuating, that one investment choice is exclusive or delimiting to any other, but AVGO's dividend is the shtuff, and Hock Tan has delivered, time and again, y-o-y.
This is a very written synopsis of QCOM. Thank you. I initiated a position when it was in the dumps and have selectively added to where it's close to a full position in my portfolio today. It's a hard tech to stock not to own...not in love with their management and litigiousness but the company is well positioned for growth. I see this as a hard to find near bargain in the tech sector that is stable, pays a decent dividend and should grow nicely.
Steve Rasher profile picture
@Chuck Walston Thanks for the excellent update on $QCOM. I have owned it since 1995. Yes, it has had its occasional bumps in the road, but it has always been at the forefront of communications related technology. Apple will try to make its own chipsets, and it may succeed, but the bigger question is what will be the quality of those chipsets as compared to $QCOM's? Lest we forget, Samsung ventured down the same road and guess whose chipsets and modems they now use? Moreover, I have said for some time the vehicle is its next big addressable market. Just ride this juggernaut for growing dividends and long term wealth. Steve
Chuck Walston profile picture
@Steve Rasher

Good to see you.

Additionally, it is likely Apple will pay royalties to QCOM for the chipsets they produce. Furthermore, there is a reason QCOM is dominant in the space. Better performance. Beware if Apple designs interior chips and opts to use those in place of QCOMs.

Steve Rasher profile picture
@Chuck Walston That's what happened to Samsung. They developed their chips, but when they started selling phones with them, the performance reviews were not very kind, to say the least. Thus, they reverted to using $QCOM product. It will be interesting to see what Apple does. Steve
Chuck Walston profile picture
@Steve Rasher

I have to say, I would chuckle a bit if Apple committed the same error. I don't know why, as I'm invested in Apple? I guess there is a side to me that doesn't care for the way some of the dominant companies throw their weight around, even when it benefits me, the shareholder.

ArtfulDodger profile picture

That is an excellent piece. It provides the best rundown of both sides of QCOM's products and earnings that I've seen. Good work!

A couple of things: One, you did not address the company's debt, which has sneaked up fairly high in the last few years. Two, you may know some, but two groups I work with in different areas and one in stocks have asked tons of people about wanting or not "autonomous driving; and we've yet to get a "yes" answer from anyone. Most would not mind some partial autonomous driving on the road, but no one would even try it with local driving. They don't even understand the "why" of pushing drivers toward that end.

Thanks for the piece!

I remain, the ArtfulDodger
Chuck Walston profile picture
@ArtfulDodger ,

Appreciate the response. With every article, I must choose to some some material due to the length of the piece. I agree that the debt profile is not what it once was, but my short answer to that is Argus rates their financial position as "medium high."

Regarding autonomous cars. Have you driven the near autonomous Tesla? I agree that there is a great deal of resistance to the idea; however, imagine your blind neighbor tooling around town in an autonomous. How about an 85 year old that lost his/her license and has no other choice. How often will others see these folks "driving" before they take the plunge. Doing your work, or studying for exams while "driving." How about the crew heading to Vegas, watching the ballgame while drinking a brew?

@Chuck Walston I think the first big use of autonomous driving will be to replace long-haul truck drivers who are in short supply and whose shifts are limited due to DOT regulations.
Bin there dun that profile picture
Great article, Chuckster. You NAILED IT! $QCOM is my largest holding right now, fwiw.
Hope you guys are all staying healthy and doing good! 😊
Chuck Walston profile picture
@Bin there dun that

Hey, buddy. Long time, no see. We are well, hope ya'll are the same,

Guy at Work reading SA profile picture
I just hope for the day in 20xx where virtually everything is connected wirelessly and QCOM has a role in that future. If they are the leaders in wireless tech then it will be a very beneficial investment.
cyrano13 profile picture
Everybody loves QCOM, but nobody is focusing on the price increases they and all others will have to pay the fabs. Waiting for a much lower entry price.
Downtown10 profile picture
@cyrano13 Assuming you’re correct that the fabs will be charging more, why do you believe QCOM won’t be able to pass along those price increases to their customers? When chip demand is high and supply is low there is no way QCOM will be making LESS profit per modem sold.
@cyrano13 There is a gap in the chart just below 100, if I recall correctly. I bought a starter portion around 128, but it would not surprise me if that gap were filled, and if it is, that is the buying opportunity for long-term investors...
Nice article Chuck. Thank you. And a special thank you for your service. Another thing of interest regarding QCOM is the extraordinary % of sales the company spends on R&D. I am not remembering the amount but think it was over 17%.
10 Apr. 2021
I bought the stock at $160 and still waiting to get out of it. The reason I thought that it was undervalued when I did. This article is great and will consider buying more instead of cutting my loses.
@Mct10 If your purpose be a long-term holding for your portfolio I encourage you to stay with QCOM. Easier for me with a basis of $54; but the author’s thesis is correct. Radio is A-D-A is much tougher to master than purely digital hardware. That’s why there’s only ~20 companies in the world who can do this, and of the top 5 Qualcomm is the only commercial supplier. The others are all military contractors. The combination of arcane scientific wizardry, global scale and a thicket of patents makes it very tough to break into this market. Apple will soon find out.
@Koshien Kid - Apple doesn’t need to break in to the market. Vertical integration means bringing its own market and selling to itself.
Have invested in QCOM off and on since the '90s. One thing I learned is that QCOM is usually ahead of the curve in developing IP. And when you're ahead of the curve, it can take time for the curve to catch up so you need to be patient. I've done well buying it when I thought it was cheap - especially after sell offs. I've been building up a position in recent months. I do it with in-the-money call leaps as the time premium isn't that high and I get a nice 3-4x leverage play. Does it work for me? Yep, I made over $70k last year and year to date, altho I'm a bit underwater on my current position (about $5k), but the calls don't expire until 1/22 and 1/23. Yes, QCOM has some tough times ahead short term, but long term they'll do well. Thanks for the article.
@coloradan I, also, use the same strategy. My 1/15/21 $90 LEAPS ended with an $83,027 gain. My 1/21/22 LEAPS likewise are underwater at this time. In addition I continue "nibble" to add to my QCOM position. Meanwhile I also thank the author for his well written article.
I am a bit surprised with the article. I fully agree that the company has a good future but I think there is a lot of uncertainty over when this will start to have its full impact. If I look at the price chart I have the impression that a lot of the future growth, especially this year and next is already in the current price and therefore the stock is not undervalued at all at the moment. Ref: FAST Charts.
Chuck Walston profile picture
Chuck, thank you for this article. I found it easy flowing while disclosing a plethora of information. Wish more writers had your knack! Keep up the great research and delivery.
craftbrewinfo profile picture
@Chuck Walston another great article. I’ve had my eye on TXN and that shot to the moon .. qualcomm ? Same thing .. damn the torpedoes is right.. i may just have to jump in and Go ! Thought provoking as always
Chuck Walston profile picture

Uh huh...I know what you're up to. You compliment my work so you can get out of giving me a brew. Ain't working. I DEMAND a free brew !!!

craftbrewinfo profile picture
@Chuck Walston I'm drinking it while I post on your threads,cheers :-)
Jorel Boston profile picture
Great Article. Definitely confirmed reasons why I own, and why I purchase more & more. Whenever I see The Fifth Element I always wondered what chips have those cars flying 😂
-Long QComm
Gus McCrae profile picture
Anybody have any thoughts on specific opportunities for QCOM around the Nuvia acquisition? Could it mean that QCOM might actually deliver the often-promised but never realized single device that serves as both phone and laptop/desktop? And/or, is the Nuvia team going after Nvidia/AMD? Either one of these scenarios would be amazing for QCOM with decent execution. Thougths?
Chuck Walston profile picture
@Gus McCrae

I considered discussing the Nuvia acquisition, but I also have to balance content with article length. I view the acquisition as a strong positive. I'm of the opinion the deal will enhance QCOM's already strong advantages in development of new tech.

Gus McCrae profile picture
@Chuck Walston Yes, I have no doubt the Nuvia acquisition will enhance QCOM's ability to develop new tech...the question to me is whether or not there is a specific plan they are executing on to do something major with Nuvia? The "major" things I can think of are (1) a single mobile phone device that also serves as a suitable laptop for most users, and/or (2) GPU's to take on Nvidia/AMD.
@Gus McCrae - QCOM will have to compete with AMZN graviton in the server space and Apple outside of that, both of which have years of head start and are vertically integrated. Nuvia is oriented to the data center and QCOM’s first priority-since they killed their own data center ARM initiative-is mobile, and that after they abandoned their own custom ARM in favor of reference designs. It will take a good bit more than decent execution to pull off.
Vandooman profile picture
Good article. You confirmed my view of the stock. I am very long and staying very long.
Chuck Walston profile picture
@Vandooman ,

Good to see you, and glad to be of service, Chuck
BM Cashflow Detective profile picture
Qualcomm's year-on-year change in revenues and earnings are better than the median among its peer group.

Qualcomm is expected to benefit from sharply increasing revenues this year. But in the following year the growth prospects seem to flatten a little.

After that, the company appears to face weaker demand from China. Chinese OEMs are withdrawing new 4G device orders and managing their inventory in advance for the transition to 5G. As a result, Qualcomm expects to have a significant impact on device shipping as sales and sell-through growth rates realign and channel inventory levels in China are reduced. So far, so bad.

However, Qualcomm expects future healthy growth momentum brought about by new product launches, including devices with 5G chipsets, and growth in Articial Intelligence (AI) that can turn vehicles into self-driving cars.

This will have a significant impact on future Estimated FCF Growth with an average growth rate of 21.50%. This could mean an average total annual return of 18.7% over the next 18 months.

The paths of progress are neither short nor easy. The key to progress is not the rapidity of the pace, but the uninterrupted movement of the forward.

Therefore, $QCOM is an extremely successful company over the long term and the stock is a promising investment.
rj.farr profile picture
@BM Cashflow Detective

Hi BM,

Was reading an interesting article that involved streaming services, cable and satellite TV. I'm long on Discovery and Viacom and was looking for validation. The article referenced how 5G would enable wireless Internet service, which is appealing in my list of options in Seattle suburbia.

Our phone provider is T-Mobile and they just recently blasted me with an announcement that 5G was available here. There has not been much of a reason to get excited about that but a few of the pieces of the puzzle fell together.

TM had been pursuing their own TV offering and just recently threw in the towel because there are plenty of more popular and established streaming options. They hooked up instead with Google's YouTube TV which has a boatload of programming for less than we're shoveling out for Direct TV. We also overpay for a wired Internet connection.

Our last child will be off to Tucson for grad school in the fall so we can dump Direct TV and its singular attraction - NFL Sunday Ticket. I did realize that it will mean upping our phones to 5G and I'm very happy with the mid-priced Google Pixels, so we'll have a go-to plan.

I imagine people with all the major phone carriers will be evaluating a similar scenario where they can ditch traditional wired/satellite programming and/or Internet service. This will create one of the "super cycles" normally attributed to a very successful Apple iPhone launch. But the sales will be from everyone's favorite brands and useful on whatever carriers have reliable 5G in their appropriate zip codes. And QCOM will get a slice of just about every transaction and upgrade that follows.

BM Cashflow Detective profile picture
Thank you for your very interesting and insightful comment. I liked it very well.

Please take the following into account in this context. For us as shareholders, the decisive factor is not how much a new technology will change or improve society, but rather only whether the companies involved can convert the revenues into increasing free cash flow over the long term. Only then are lasting values created. Everything else disappears again in the infinite universe of the constructive destruction of capitalism.

"Never take your eyes off the cash flow because it's the lifeblood of business."
- Sir Richard Branson, business magnate, investor, author and philanthropist

In this respect, you are excellently positioned with your shares. Congratulation. Just keep these successful winning stocks forever.

We always need the identity of a winner.

Winners attract opportunities.

Only your own deep conviction as a winner makes the crucial difference to be successful in the long term, compared to everyone else with excruciating doubts.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About QCOM

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on QCOM

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.