You can call it the end of an era for Qualcomm (NASDAQ:QCOM). CEO Steve Mollenkopf plans to retire this summer, amid a well-documented microchip shortage. So, should QCOM stock investors be worried?
Mollenkopf will be succeeded by current company president Cristiano Amon, who will undoubtedly bring a wealth of expertise and experience to the CEO role.
Meanwhile, the chip shortage likely contributed to QCOM stock falling 18.8% from its 2021 peak price at the beginning of February as supply chain crisis first made headlines. The iShares PHLX Semiconductor ETF (NASDAQ:SOXX), which has Qualcomm shares in the number three spot in its 32-stock portfolio, is actually up 3.12% in the same period.
Yet, even as Qualcomm grapples with a lopsided supply-and-demand balance, there’s data to show that the company is thriving — not only in its chip-making segment, but in other areas as well.
A Closer Look at QCOM Stock
QCOM stock’s decline this year isn’t necessarily a bad thing. If anything, it presents a great opportunity for value investors.
A year ago, Qualcomm shares were trading at around $80. After a powerful run-up, the stock topped out at a 52-week high of $167.94 in early February.
When a stock doubles in a matter of months, it’s normal for the buyers to take a breather.
Besides, the investors have been concerned about the current semiconductor shortage, so it’s perfectly reasonable that the QCOM stock price came down.
On May 25, the stock was trading at $133.75. That’s a pretty good discount to the peak price.
And with that, QCOM stock’s trailing 12-month price-to-earnings ratio was just 19.15. This indicates an very fair value for anyone interested in investing in Qualcomm today.
Growth in Multiple Segments
As I alluded to earlier, Qualcomm, which specializes in making chips for smartphones, recently posted encouraging data.
The company’s second fiscal quarter included a number of highlights which should quell the skeptics’ concerns about Qualcomm:
- Net income of $1.76 billion ($1.53 per share), a vast improvement over the $468 million (41 cents per share) from the year-ago period
- Earnings of $1.90 per share (adjusted for stock compensation and other factors), easily beating analysts’ consensus estimate of $1.67 per share
- $7.94 billion in revenues, outperforming the consensus estimate of $7.63 billion
Just as importantly, the second fiscal quarter demonstrated that Qualcomm is expanding across its business:
- Chip-making segment revenues up 53% to $6.28 billion ($4.07 billion of which came from handsets)
- Radio chip business revenues up 39%
- Auto business revenues up 40%
- Internet of things (IoT) revenues up 71%
- Licensing segment revenues up 51%
In light of this data, Patrick Moorhead, principal analyst at Moor Insights & Strategy, observed Qualcomm’s dominance in at least two business segments.
“These numbers likely make Qualcomm the largest smartphone RF provider and one of the largest IoT chip manufacturers,” Moorhead wrote.
Incoming CEO Bets on 5G
Amon is expected to take over Qualcomm’s CEO position in June. He’s been the company’s president since 2018, and investors should expect Amon to focus heavily on 5G technology.
“5G is doing great,” Amon said in an interview. “It has stayed consistent with our expectations. And it proved to be resilient to the pandemic. We’re on track to have a half-billion 5G devices on the network in 2021—and we’re still in the first inning of the 5G game.”
As Amon sees it, 5G connectivity should improve video streaming quality and help to eliminate data transfer caps.
Regarding the microchip shortage, Amon acknowledges the issue as impacting the entire industry.
“If you are a semiconductor company and not short, you should be worried,” he said.
Nonetheless, Amon doesn’t seem overly concerned about this issue.
His company is still benefiting from strong foundry relationships, he contends, and this should get Qualcomm’s semiconductor supply “very close to demand” by the end of 2021.
The Bottom Line
I’m not saying that QCOM stock investors should just ignore the chip shortage. It’s definitely an issue to be aware of.
Still, it’s not likely to present a permanent problem for a market leader like Qualcomm, which should continue to thrive with its incoming CEO at the helm.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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