Qualcomm Stock Price Forecast November 2021 – Time to Buy QCOM Stock?

Qualcomm (QCOM) stock was trading sharply higher in US premarkets today. The stock is down over 9% so far in the year and trades 17.5% below its 52-week highs.

Chipmaker stocks’ have looked weak in 2021. What’s the forecast for QCOM stock and is it a good buy in November 2021?

Qualcomm stock recent developments

Qualcomm reported its fiscal fourth-quarter earnings yesterday after the close of US markets. The company reported adjusted revenues of $9.3 billion which were 43% higher than the corresponding period in 2020 and were ahead of the $8.86 billion that analysts were expecting.

The company’s adjusted EPS came in at $2.55 which was higher than the $2.26 that analysts polled by Refinitiv were expecting. Looking at the segment-wise break up, the company’s chip business reported sales of $7.7 billion in the quarter which were 56% higher than the corresponding period last year. Qualcomm Technology Licensing reported a 3% increase in revenues during the period.

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QCOM earnings beat estimates

Within the chip business which is named QCT (Qualcomm CDMA Technologies), sales to the handset industry increased 56% to $4.68 billion. Sales to smartphone companies are the biggest revenue driver for Qualcomm. Sales to RF front end increased 45% while automotive sales increased 44%. In terms of percentage increase, sales to IoT customers increased 65% and reached $1.54 billion in the quarter.

Chip shortage

Notably, there has been a severe chip shortage globally which is taking a toll on several industries including automotive and electronics. In its fiscal fourth quarter, Apple said that chip shortage cost it $6 billion in lost sales. The company’s revenue growth missed analysts’ estimates in the quarter. Apple lost the title as the world’s largest company to Microsoft whose stock is outperforming the markets this year. Under Satya Nadella’s leadership, Microsoft has seen a rerating of its valuation multiples as the company has been pivoting towards several emerging and high-growth industries.

Qualcomm’s guidance was better than expected

Qualcomm’s guidance for the current quarter was also better than expected. The company expects to post revenues between $10-$10.8 billion in the quarter which are ahead of the $9.68 billion that analysts were expecting.

QCOM sounded upbeat on the business outlook and said that it is seeing continued momentum in end industries. QCOM CFO Akash Palhkiwala said during the earnings call that “Looking forward, fiscal ’22 will be another exciting year for Qualcomm with year-over-year EPS growth expected to exceed 20%, driven by strength across all QCT revenue streams.” He added, “In handsets, we are positioned to benefit from the $10 billion SAM expansion due to the changing OEM landscape. A portion of this benefit is reflected in our first quarter guidance, and we also expect it to contribute to the rest of fiscal ’22.”

Markets also seem pleased with the earnings and guidance and Qualcomm stock was trading over 10% higher in US premarket price action today. QCOM said that it expects the chip shortage situation to persist in the first half of 2022 but believes that the demand-supply equation would be largely in balance in the second half of the year. Other chipmakers are not as optimistic though and Intel expects the chip shortage situation to extend into 2023.

Qualcomm stock price forecast

Wall Street analysts are reasonably bullish on Qualcomm stock. Of the 30 analysts polled by CNN Business, 19 rate the stock as a buy while the remaining nine have a hold rating. The stock’s median target price is $176 which is a premium of 27.1% over its yesterday’s closing price. The street high target price of $303 is a premium of almost 120% while the street low target price of $137 is similar to current prices. That said, after the stellar earnings and guidance, Wall Street analysts might upwardly revise QCOM’s target price.

QCOM target price

Incidentally, last month, Mizuho, KeyCorp, and Wells Fargo had lowered Qualcomm’s target price. However, in September Raymond James had reiterated its strong buy rating on the stock. “We think it’s possible that QCOM could still retain all or part of the Apple business, especially given the complexity of mmWave, which is increasing in importance to iPhone, and only QCOM currently has the ability to supply that technology,” it said in its note.

Apple and Qualcomm have had a strained relationship and in 2017 the iPhone maker had sued QCOM in a $30 billion antitrust case. However, the two parties announced a settlement on the very second day of the trial. During the earnings release, Qualcomm pointed to its contract with Apple and said that it is only factoring the contracted sales in its forecast.

Raymond James said, “Net, given our near term expectations for numbers to move higher, a reasonable valuation even excluding Apple, the likelihood that QCOM retains this business through iPhone 14, and the potential that QCOM doesn’t lose the business after all, all adds up to a very attractive risk/reward.”

Qualcomm stock long term forecast

Qualcomm has been diversifying its business which would be a long-term driver. The company is also a play on the 5G industry and would be among the beneficiaries of the 5G transformation.

Should you buy QCOM stock?

Qualcomm stock looks reasonably valued with an NTM (next-12 months) PE multiple of 15.4x, which is below the five-year average of 17.3x. Considering the continued momentum in Qualcomm’s business, the risk-reward looks attractive at these prices.

Qualcomm stock is looking bullish on the charts also and has crossed above both the 50-day and 200-day SMA (simple moving average). However, the stock is getting near the oversold zone with a 14-day RSI (relative strength index) of 66.6. RSI values above 70 signal oversold positions.

The stock also pays a healthy dividend and at current prices, the yield is just below 2%. If you are looking at a stock that pays a good dividend and also offers potential for capital appreciation, QCOM would fit the bill.

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