Categories Analysis, Technology

After a promising year, Qualcomm (QCOM) looks to thrive on 5G ramp and more

Qualcomm Incorporated (NASDAQ: QCOM) managed to stay ahead of its peers last year, constantly expanding market value even though the semiconductor industry witnessed a slowdown amid falling demand.

Related: Qualcomm Q4 2019 Earnings Conference Call Transcript

Qualcomm shares traded at an all-time high this week, continuing the steady uptrend that began more than a year ago. Market watchers, in general, recommend buy. The average price target is about $100, compared to the last closing price of $91.79. The reasonable valuation makes the stock attractive to investors, who will be looking for cues on what awaits it this year.

Qualcomm (QCOM) Q4 2019 Earnings Review

It is safe to assume that the stock would maintain the uptrend in the run-up to the next earnings release, which is expected by the month-end. Beyond that, the performance will depend a lot on the management’s guidance and comments on the pipeline for the year.

Bullish View

While a near-term pullback cannot be ruled out, it would be modest if the bullish outlook on the semiconductor industry is any indication. Also, any future dip will give prospective investors an entry point.

Laptop Chips

Qualcomm’s shift from smartphone processors to the laptop segment – complemented by the launch of the Snapdragon 7c and 8c chips – is viewed as a promising step towards achieving the growth targets. Having patched up with top customer Apple (AAPL) by ending the legal battle, Qualcomm can now look forward to power the iPhone-maker’s 5G smartphones in the near future. With the popularity of the iPhone brand fading gradually, Apple would need Qualcomm chips to innovate its portfolio.

Citi Upgrade

The company got a fresh fillip on Friday after Citi upgraded the stock to buy from neutral and lifted the target price to $109 from $89, citing potential tailwinds from the imminent 5G ramp. Being fairly exposed to 5G, Qualcomm is well-positioned to benefit from the upgrade cycle that has just begun. According to the analyst, revenue growth, royalties and market-share expansion are in the offing.

Also see: Is semiconductor industry returning to growth mode?

In the fourth quarter, revenues and earnings decreased in double digits as the slowdown in the market weighed on demand. The performance of CDMA Technologies, the company’s core chip business, fell short of expectations. Earnings, including special items, benefited from the cost-reduction initiatives.

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