Qualcomm stock (QCOM) could be one of the best bargains in the tech sector, especially among large-cap peers. The global leader in wireless connectivity has seen its shares underperform recently. While the stock is up 24.96% over the past year, shares are now trading 31% below their 52-week high. Yet, Qualcomm posted record EPS in Fiscal 2024 and seems positioned for another year of continued earnings growth in Fiscal 2025. The potential for further earnings growth against a lackluster share price has formed a compelling setup, suggesting that Qualcomm’s valuation is rather appealing. Hence, I am bullish on QCOM stock.
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Recent Growth not Reflected in Share Price
Qualcomm’s record earnings for Fiscal 2024, which wrapped up this past September, were mainly driven by steady revenue growth—a factor that doesn’t seem fully reflected in its share price. To shed some light, throughout Fiscal 2024, Qualcomm’s total revenues grew by 9% to reach $39 billion, driven primarily by its leading chipset segment, which continues to gain traction in sectors like automotive, handsets, and IoT. Specifically, the company’s QCT (Qualcomm CDMA Technologies) segment generated $33.2 billion in revenues, marking a 9% year-over-year increase. Growth in automotive was quite strong, too, with sales rising 55% over last year.
To outline specifics, Qualcomm’s growth was fueled by its focus on diversifying its product offerings. The Snapdragon platform, widely adopted by smartphone manufacturers, benefited from growing traction across laptops, XR (Extended Reality), and automotive sectors. In the meantime, rising demand for on-device AI solutions and expansion into industrial IoT also drove incremental revenue. Finally, new product launches—such as the Snapdragon X Plus 8-core compute platform—helped hold a competitive edge in various areas, further contributing to Qualcomm’s top-line growth during the year.
Record EPS and Promising Future Guidance
Back to the bottom line, Qualcomm posted a record adjusted EPS of $10.22 for Fiscal 2024, which marked a significant 21% growth over the previous year. EPS growth was driven by solid revenue growth, as I just discussed, and operational improvements, pushing margins higher. Qualcomm’s adjusted earnings before tax (EBT) margin for the QCT segment, for example, expanded by 3 percentage points to 29%, thanks to disciplined cost management and a favorable product mix.
Looking at the bigger picture, Qualcomm’s operating margin improved significantly, rising from 24.2% to 26.3% over the year. Management’s comments show that this increase was primarily driven by higher revenues from high-margin licensing and excellent performance in the automotive and IoT sectors, which helped lower manufacturing costs.
Looking ahead, Qualcomm’s guidance for Fiscal 2025 suggests continued momentum. Management sees QCT revenues to grow to between $9.0 billion and $9.6 billion in Q1 of Fiscal 2025, driven by the growing adoption of Snapdragon in flagship Android smartphones, automotive solutions, and IoT devices. Based on this outlook, consensus estimates point to an EPS of $11.19 for Fiscal 2025, signaling another record year in earnings for the company and a year-over-year growth of almost 10% over Fiscal 2024.
One of the Cheapest Valuations in the Sector
Despite Qualcomm’s recent exciting results in Fiscal 2024 and encouraging outlook, the stock’s valuation remains one of the most attractive among large-cap technology companies. Based on the consensus EPS estimate of $11.19, shares are trading at just 14.2 times this year’s expected earnings, Implying a steep discount compared to most large-cap tech stocks.
One could argue that investors remain wary due to Qualcomm’s exposure to cyclical end-markets like smartphones. However, recent trends suggest a more stable outlook. Growing adoption of 5G and advancements in edge computing, such as on-device AI, make me confident that Qualcomm’s business model is becoming more diversified and resilient.
Further, the rising demand for connected solutions in automotive, IoT, and industrial applications should remind us that Qualcomm is not just a smartphone company but, rather, a tech ecosystem player whose growing backlog positions it for continued success.
Is QCOM Stock a Buy?
Wall Street analysts appear optimistic about Qualcomm’s future prospects. Specifically, QCOM stock features a Moderate Buy, with recent analyst ratings consisting of 11 Buys, nine Holds, and one Sell rating over the past three months. At $201.13, the average QCOM stock price target implies an upside potential of 26.6% from its current levels.
For the best guidance on buying and selling QCOM stock, look to Michael Walkley. He is both the most accurate and most profitable analyst covering the stock (on a one-year timeframe), boasting an average return of 34.54% per rating and an outstanding success rate of 79%.
Conclusion
In conclusion, I believe that Qualcomm stock offers a compelling investment opportunity. The company posted record-breaking earnings in Fiscal 2024, with its momentum set to be sustained, powered by its diversification into high-growth areas such as automotive, IoT, and on-device AI. These catalysts illustrate its ongoing transition from a smartphone-centric business to a broader tech ecosystem leader.
Despite such favorable fundamentals, Qualcomm’s stock seems to trade at a notable discount to its large-cap tech peers, making its valuation particularly attractive. For this reason, I see the stock as an attractive tech pick, offering both the possibility of a strong upside ahead and a solid margin of safety.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
