The real boom is yet to come

For the quarter to 25 December 2022, Qualcomm’s revenue declined by 12% to $9.5bn. Pre-tax profits dropped by 39% to $2.4bn while EPS dipped 34% to $1.98.

Yet Qualcomm remains very positive about its long-run prospects. “As the recovery happens we will be in a position to benefit from it”, says CFO Akash Palkhiwala.

“The long-term trends driving demand for our differentiated technologies and solutions are intact,” says CEO Cristiano

Amon. “[We] believe we are in the strongest position in our history.” In a mark of confidence in the future, Qualcomm has just hiked its quarterly dividend to $0.80 per share from $0.75/share.

An average of analysts’ EPS estimates puts the stock on a current-year price/ earnings (p/e) ratio of 12.5, with the multiple expected to drop to just above ten in 2024. For a major long-term growth business operating in a sector vital to the way we now live, that is distinctly cheap.

Sure, there are risks in buying Qualcomm now. Inventory de-stocking may continue for longer than anticipated.

The computerised device industry recession may prove deeper than expected, and inflation remains another uncertainty. However, most of the potential hazards appear discounted by the sharp share price pullback.

Moreover, the firm’s focus on the automotive industry, with manufacturers moving towards smarter, more tech-heavy vehicles, is very exciting. “We are only at the very early stages of that revolution”, says Martin Tillier on Nasdaq.com, “and while it has resulted in significant demand for Qualcomm, the real boom is yet to come.”

Buying into current weakness could prove to be a very smart move in years to come. The second-quarter results are due to be released on 3 May 2023.