Is Qualcomm The Ultimate “Safe” Tech Buy?

 Posted in News

Qualcomm (QCOM) could be a good choice for your investment portfolio, given its high cash yield, strong fundamentals, and discounted valuation. Companies of this nature can utilize cash to accelerate further revenue growth, or simply return it to their shareholders via dividends or stock buybacks. Either approach makes them appealing to investors.

Current Developments with QCOM

QCOM shares are presently trading at a P/S (Price-to-Sales) ratio that is notably discounted compared to its 3-month and 2-year peaks, and is also lower than its 3-year average.

Although it may not be apparent in the stock’s current valuation, there are several positive developments occurring for the company. Qualcomm’s automotive division is showing robust growth, boasting a design pipeline worth $45 billion and over 75 million vehicles equipped with Snapdragon Digital Chassis. The company is also making strides into AI PCs, with 150 Snapdragon designs slated for 2026, focusing on on-device AI. This diversification has played a role in driving Q4 FY2025 revenue up by 10% year-on-year, and Q1 FY2026 revenue guidance projects figures between $11.8 and $12.6 billion, surpassing expectations.

QCOM’s Strong Fundamentals

  • Strong Cash Yield: Few stocks provide a free cash flow yield of 7.8%, but Qualcomm does.
  • Robust Margin: Operating margin of 28.0% over the past 12 months.
  • Growth: Revenue growth over the last 12 months stands at 13.7% — relatively low growth, but this selection emphasizes high yield and margin.
  • Valuation: QCOM is currently trading at 30% below its 2-year high, 16% below its 1-month high, and at a lower P/S ratio than its 3-year average.

Below is a brief comparison of QCOM’s fundamentals with S&P medians.

What Are the Risks Involved?

Even though QCOM stock may present an appealing investment opportunity, it is beneficial to be aware of its historical performance during downturns. QCOM experienced a nearly 79% drop during the Dot-Com Bubble, a decline of 48% during the Global Financial Crisis, and a fall of approximately 44% during the recent inflation surge. Even milder events — such as the 2018 Correction and the Covid selloff — saw the stock plummet by over 33% and 36%, respectively.

Strong fundamentals are crucial, yet significant market selloffs can still heavily impact even well-performing stocks. Furthermore, risks are not confined to major market downturns. Stocks may decline even during robust market conditions — consider occurrences like earnings reports, business updates, or outlook revisions. Check out QCOM Dip Buyer Analyses to explore how the stock has rebounded from substantial declines in the past.

For further insights and our perspective, please visit Buy or Sell QCOM Stock.

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Stocks Similar to QCOM

Not prepared to invest in QCOM? Consider these alternatives:

  1. Salesforce (CRM)
  2. Adobe (ADBE)
  3. Elevance Health (ELV)

We selected these stocks based on the following criteria:

  1. Market cap exceeding $2 billion
  2. Declined last month and meaningfully below 2-year high
  3. Current P/S ratio lower than the average over the past few years
  4. Strong operating margin without significant margin contraction
  5. High free cash flow yield

A portfolio comprised of stocks meeting these criteria would have performed as follows since December 31, 2016:

  • Average forward returns of 10.4% over 6 months and 20.4% over 12 months
  • A win rate (percentage of selections that returned positively) of approximately 74% over the 12-month period
  • Consistent strategy performance across various market cycles

Expand Your Investment Beyond Single Stocks With A Multi-Asset Portfolio

Stocks can experience sharp increases or declines, but various assets behave differently throughout market cycles. A multi-asset portfolio aids in maintaining your investment while mitigating fluctuations in stock prices.

The asset allocation framework from Trefis’ wealth management partner in Boston delivered positive returns during the 2008-09 period when the S&P experienced over a 40% loss. Our partner’s current strategy incorporates Trefis’ High Quality Portfolio, which has a proven record of comfortably outperforming its benchmark, including all three indices — the S&P 500, S&P Mid-Cap, and Russell 2000.

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