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QUALCOMM Incorporated (QCOM)
- Equity
- US
- Technology
RISK
RETURN
Key risk factors
Strong trading liquidity
Resilient to price shocks
Limited default risk
Key return factors
Very strong margins and returns
Favourable price performance
Overvalued vs peers
Corporate actions & dividendsDividend of USD 0.850 with an ex-date of 30 May 2024.
Company profileQUALCOMM Incorporated engages in the development and commercialization of foundational technologies for the wireless industry worldwide. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies for use in wireless voice and data communications, networking, application processing, multimedia, and global positioning system products. The QTL segment grants licenses or provides rights to use portions of its intellectual property portfolio, which include various patent rights useful in the manufacture and sale of wireless products comprising products implementing CDMA2000, WCDMA,LTE and/or OFDMA-based 5G standards and their derivatives. The QSI segment invests in early-stage companies in various industries, including 5G, artificial intelligence, automotive, consumer, enterprise, cloud, and IoT, and investment for supporting the design and introduction of new products and services for voice and data communications, new industries, and applications. It also provides development, and other services and related products to the United States government agencies and their contractors. QUALCOMM Incorporated was incorpotared in 1985 and is headquartered in San Diego, California.
Valuation: Overvalued
Multiple
TTM
NTM
P/E
28.00
25.00
PEG
2.10
-
P/B
9.60
6.90
P/S
6.40
6.10
P/FCF
19.20
20.50
EV/EBITDA
22.70
18.50
Based on key historical and expected multiples, the stock is overvalued relative to its peers. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITDA, and overvalued on P/FCF.
Performance: Favourable
The stock has been growing steadily in the past six months, adding 67% in total. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 62ppts in total. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is positive. Usually, this means that a fairly valued or slightly undervalued stock has become more 'expensive', indicating that the market, in general, may have gained short-term confidence in the stock.
Analyst view: Neutral
The average target price is 171 and suggests 19% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 220.0. This translates into 5% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 132.0. This is equivalent to 37% downside potential in the worst case.
Profitability: Very strong
RoE
QUALCOMM Incorporated reported a return on equity (RoE) of 35.3% in the last 12 months, down from 37.1% in FY23. The market consensus projects an RoE of 32.5% in FY24, again ahead of its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 15.9% in the last 12 months, an increase from 15.2% in FY23. The market analysts predict that RoA will be 15.9% in FY24, again stronger than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) grew to 19.3%, above the peers. The consensus estimate for FY24 for RoCE is 21.0%, again ahead of the peers.
Net margin
EBITDA margin
Historically, QCOM has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 23.0%, a growth from 21.4% in FY23. The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 29.2% in the last 12 months, up from 28.8% in FY23.
RoIC / WACC = 2.7(strong value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.7 in the past several years. This ratio implies a strong shareholder value creation. Growth: Average
Revenue
EBITDA
EPS
Free cash flow
QCOM reported revenue of USD 36 406mn in the last 12 months, up 0% from FY23. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS grew 8% from FY23 to USD 7.51. Market expects EPS to reach USD 8.38544 in FY24.Revenue growth has been constrained in the past several years (negative-to-neutral), while EBITDA has grown slowly in recent years. Net income has grown only slightly in recent years. The FCF trend is in line with EBITDA. We emphasize the highly volatile dynamics of EPS and EBITDA. On the positive side, FCF dynamics is very stable.
Dividends: Decent
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been moderate and on par with its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.
Default risk: Limited
The risk of default is minimal. We note robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, and solid cash flow generation, among the positive credit factors. Among the negative credit factors, we point to slow historical revenue growth, excessive margin volatility, and poor working capital management.
Volatility: Modest
In normal market circumstances, QCOM is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to mild.
Stress-test: Resilient
In highly turbulent market conditions, QCOM is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low.
Selling difficulty: Very low
QCOM boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.