Key Takeaways:
- The 2-Minute Valuation Model values QCOM stock at $175 per share in 2 years.
- That’s a potential 25% upside from today’s price of $140 per share.
- Qualcomm’s earnings-per-share is projected to grow about 18% over the next three years.
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Qualcomm Incorporated (QCOM) is a leading semiconductor and telecommunications equipment company best known for its dominance in mobile processor technology and cellular modems.
Qualcomm has established a formidable competitive position as the owner of critical wireless technology patents and a major supplier of chips to smartphone manufacturers worldwide.
Moreover, recent market concerns about smartphone saturation and competitive pressures make Qualcomm look cheap today.
Let’s examine whether Qualcomm’s current valuation offers a compelling opportunity in the semiconductor space.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why QCOM Stock Looks Undervalued
Forecast
Qualcomm’s projected earnings profile shows strong initial growth in 2025 with growth expected to taper off in 2026. This pattern reflects Qualcomm’s current position in the smartphone chip market cycle, with significant growth expected in 2025 as new smartphone models and potential AI integration drive demand, followed by slower growth as the market matures.
It’s likely that Qualcomm will see further bouts of growth in the future after 2027.
This earnings growth for QCOM stock is likely to be driven by:
- 5G Cycle Expansion: The ongoing 5G upgrade cycle continues to drive chip demand, with potential for further penetration in emerging markets.
- Automotive and IoT Growth: Qualcomm is diversifying beyond smartphones into automotive connectivity, IoT, and industrial applications, creating new growth avenues.
- AI Integration: The company is leveraging its expertise in power-efficient processing to enable on-device AI capabilities, positioning it well for the growing trend of edge AI.
- Patent Portfolio Value: Qualcomm’s extensive patent portfolio in wireless technologies continues to generate high-margin licensing revenue.
We’ll assume in our valuation that QCOM stock will report $12 in EPS in 2027, up from about $10 in 2024.
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Is Qualcomm Stock Undervalued Right Now?
Qualcomm stock is trading significantly below its 10-year historical average multiple, creating a potential opportunity for multiple expansion as it executes on its growth initiatives.
Over the last five years, QCOM stock has averaged a forward P/E multiple of 15x, with peaks above 24x during growth-oriented market periods. Currently, Qualcomm stock trades at about 12 times forward earnings.
This compressed valuation reflects market concerns about smartphone market maturity and competitive dynamics, but may not fully account for Qualcomm’s expansion into adjacent markets and AI-related opportunities.
We’ll use a conservative forward P/E multiple of 14x for our valuation, which is below the historical average trading multiple for Qualcomm stock.
Fair Value of QCOM Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $12
- Conservative forward P/E multiple: 14x
- Expected dividends over the next 2 years: $7
Expected Normalized EPS ($12) * Forward P/E ratio (14x) + Expected Dividends ($7) = Expected Share Price ($175)
The 2-year expected QCOM stock price we would get from this valuation is $175 per share.
With Qualcomm stock currently trading at around $140 per share, this implies a potential upside of 25% over the next two years or a 12% annualized return.
Remember, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
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What is the Target Price for QCOM Stock?
Analysts have an average price target of around $177 per share for Qualcomm stock, indicating they see nearly 26% upside today for the semiconductor giant based on the current share price:
Risks to Consider
Even though our valuation suggests QCOM stock could be worth around $175 per share, investors should be aware of several risks that include:
- Smartphone Market Maturity: The global smartphone market has matured, and slowing replacement cycles could limit growth in Qualcomm’s core business.
- Customer Concentration: Qualcomm relies heavily on a small number of smartphone manufacturers, which makes it vulnerable to design losses or customer vertical integration.
- Competitive Pressures: The company faces competition from established players like MediaTek.
- Regulatory Scrutiny: Qualcomm’s licensing business model has faced antitrust challenges in various jurisdictions, creating regulatory risks.
- Cyclicality: The semiconductor industry is inherently cyclical, exposing Qualcomm to periodic demand and pricing pressure downturns.
TIKR Takeaway
Qualcomm represents an opportunity to invest in a technology leader with strong competitive advantages at a valuation below its historical average.
While growth is expected to moderate after 2025 as the smartphone market matures, Qualcomm’s expansion into adjacent markets and AI-related opportunities provides avenues for long-term value creation.
For investors seeking exposure to the semiconductor industry with a balanced risk-reward profile, QCOM stock offers an attractive combination of reasonable valuation, modest growth potential, and reliable capital returns through dividends and share repurchases.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
