In the domains of digital technology and wireless chipsets, Qualcomm (NASDAQ:QCOM) has been a leader for years and QCOM stock is a part of many investors’ portfolios. Moreover, with the advent of 5G technology, Qualcomm has emerged as a leader, thereby adding considerable value for long-term shareholders.
The 5G factor hasn’t necessarily been priced into Qualcomm stock, though, as the share price has mostly gone sideways since the beginning of the summer. I believe that the company’s foray into the 5G space, however, will propel the QCOM stock price higher in the very near future.
Recognizing the True Value of QCOM Stock
Taking a look at the 52-week range of Qualcomm stock, I’ve noted that it’s been above $90 and I see no reason why it can’t get there again in the near future. The analyst consensus is a somewhat muted, though, as the median 12-month price projection for QCOM stock is $80 and the majority of analysts — 14 out of 26 == have placed a hold rating on the stock, with 12 giving it a buy rating and none assigning QCOM a sell recommendation.
Perhaps some analysts are hesitant to give QCOM stock a buy rating because of the Federal Trade Commission’s antitrust suit which brought a bit of negative PR to the company earlier this year. Evidently, the judge in that case ruled that Qualcomm violated the law because the company had required customers to put their signature on licensing agreements before they could use Qualcomm’s products. Fortunately for Qualcomm stock investors, the ruling has recently been delayed in an appellate court.
I feel that the original ruling against Qualcomm isn’t a valid reason for long-term investors to sell their QCOM stock shares. Michael Walkley, an analyst from Canaccord Genuity, tends to concur with my assessment of the situation:
“The 9th Circuit Court granted a partial stay from Judge Koh’s FTC ruling… Qualcomm’s current licensing business practices could have limited long-term impact from the Judge Koh ruling.”
5G is the Best Reason to Own QCOM Stock Now
If any technology is underappreciated right now, it’s got to be the 5G network. As Kevin Werbach, a professor from the Wharton School at the University of Pennsylvania, eloquently explains:
“[5G technology] potentially gigabyte speeds over wireless, fast enough that for the first time wireless could be a competitive alternative for wired systems — like cable- and phone-based and fiber-based systems — for basic broadband access.”
To that end, Qualcomm has recently announced its full acquisition of RF360 Holdings Singapore, with a price tag of approximately $3.1 billion. The buyout will enable Qualcomm to deploy the powerful Snapdragon 5G Modem-RF System, which, according to Qualcomm’s website, can “provide multi-mode 4G/5G capability via dual connectivity” as well as “replace fiber-to-the-home (FTTH) installations with wireless 5G connections.”
We don’t have to delve into the arcane specifics of 5G connectivity to appreciate the aggressiveness of Qualcomm’s deep-dive into this exciting technology. Granted, $3.1 billion is a sizable bet on the profitability of the 5G network, but I tend to agree with Steven Mollenkopf, the company’s CEO, in his assessment of 5G technology as a potential game changer for Qualcomm stock:
“For the first calendar quarter of 2020, we anticipate reaching the inflection point as our financial results begin to reflect the benefits of our substantial efforts over the years to bring 5G to the market worldwide.”
The Takeaway on Qualcomm Stock
It’s rather surprising to me that analysts aren’t more optimistic regarding Qualcomm stock, especially as the company makes significant strides in 5G technology adoption. Personally, I don’t need the analyst community’s permission to believe in the 5G revolution — or in the coming breakout for QCOM stock.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.