Over the past few years, the shares of Qualcomm (QCOM) have generally been disregarded by investors. As the pioneer in smartphone chipsets, the company experienced a drop in earnings once the 5G upgrade phase ended, and the increase in demand for AI-powered phones has yet to trigger a similar growth spurt.
Additionally, it appears that Apple may stop using Qualcomm as its chipset supplier by 2027. Moreover, Apple’s significant involvement in China has had a negative impact on its share prices.
Even though these hurdles exist, investors might be missing a strong argument for purchasing this value stock. Let me explain.
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In the face of these obstacles, there remains a powerful motive for investors to consider buying this value stock. Let me shed some light on it.
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With such difficulties in mind, this value stock could present a solid investment opportunity that investors might be overlooking. Here’s the reasoning behind it.
Why investors should expect a Qualcomm comeback
In short, the reason to buy Qualcomm is its emerging business lines.
Certainly, the challenges in the smartphone chipset sector may persist. Yet, Qualcomm has been preparing for such a scenario where smartphones might lose their centrality. They’ve broadened their horizons into various sectors such as Internet of Things (IoT), automotive, and more recently, Personal Computers (PC). Furthermore, they aim to create custom processors that will be compatible with Nvidia’s AI chips.
The initial results from these actions appear promising. While the company saw a 17% year-on-year growth in total revenue during the first half of fiscal 2025 (concluding March 30), Internet of Things (IoT) revenue expanded by 31%, and automotive revenue skyrocketed by 60%. This is significantly more than the 12% rise in handset chip sales, which continue to be the primary source of income.
In addition, Qualcomm’s costs and expenses increased at a rate similar to its revenue growth. However, its net income of $6 billion in the first half of the fiscal year 2025 increased by 18%, suggesting that its chip sectors are experiencing a growth phase. Despite not releasing figures for its PC business, Qualcomm anticipates generating an annual revenue of $4 billion from this sector by the end of fiscal 2029.
Ultimately, although Qualcomm’s profits increased by double digits, its stock is priced at a P/E ratio of 16. This suggests that investors have not given much attention to the growth potential of this chip company so far. However, given the swift expansion in Qualcomm’s emerging business sectors, investors might consider capitalizing on the low P/E ratio before broader investor interest arises.
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2025-07-20 15:23