- Qualcomm still outperformed the S&P 500 since my Strong Buy thesis in May, despite being hammered since it issued a disappointing earnings release in August.
- I assessed that buyers returned with conviction in late August, helping to stem the selling volatility and help QCOM bottom out.
- Investors are justifiably concerned about Qualcomm’s challenges in China. However, Qualcomm’s September guidance suggests the worst is likely over.
- My conviction is also underpinned by highly constructive price action in August, suggesting QCOM is well-primed to continue its recovery.
- I argue why investors who missed adding QCOM’s lows in May shouldn’t miss this buying moment.
The article discusses the investment opportunity presented by Qualcomm Incorporated (QCOM) despite the company’s disappointing earnings release in August. Here are the key points:
- Strong Performance Since May: Despite the disappointing earnings release in August, Qualcomm has outperformed the S&P 500 since the author’s Strong Buy thesis in May, delivering a total return of 12.5% compared to the S&P 500’s 10.7% gain during the same period.
- Late August Support: The author highlights that buyers returned robustly at Qualcomm’s late August lows, suggesting that market operators have likely priced in the company’s near-term challenges and expect improvement.
- September Guidance: Qualcomm’s September guidance indicates potential sequential improvement in topline growth of about 1%, providing some optimism for investors. The company’s challenges in China are acknowledged, but there is confidence in overcoming these headwinds.
- Growth Drivers: Qualcomm is positioned to benefit from the growth in electric vehicles (EVs) as it monetizes its automotive momentum. Additionally, the company’s collaboration with leading automotive chip makers in the RISC-V partnership is a positive factor. Edge AI and Qualcomm’s move to Arm-based PCs are also seen as potential growth drivers.
- Valuation: Qualcomm’s forward EBITDA multiple is in line with its 10-year average, and it trades at a discount compared to some of its peers in the semiconductor industry, which is considered justified given the challenges in the Android smartphone market and revenue concentration in China.
- Technical Analysis: The article presents a weekly price chart showing that buyers have defended Qualcomm’s May 2023 lows, and August’s price action suggests the potential for a higher high market structure.
- Long-Term Uptrend: Despite recent challenges, Qualcomm remains in a long-term uptrend that has not been breached.
- Rating: The author maintains a Strong Buy rating on Qualcomm, emphasizing that the recent pullback offers an opportunity for investors who may have missed the May lows to consider investing.
Please note that this article provides investment insight and is not intended as financial advice. Investors are encouraged to conduct their own research and due diligence before making investment decisions.
