Qualcomm stock price is sending mixed signals: is it a good buy?

The Qualcomm stock price continued its recent rebound in the past few days as investors bought the recent dip. The QCOM stock was trading at $175, up by over 10% from its lowest level in November, giving it a market capitalization of over $187 billion.

Qualcomm’s growth is continuing 

The Qualcomm stock price has jumped by over 47% from its lowest level in April this year as the artificial intelligence (AI) tailwinds continued.

The rally accelerated recently after the company unveiled chips, known as the Snapdragon 8 Elite Gen 5 Mobile Platform, that may compete with Nvidia in the future. 

It then continued after the company published strong financial results, which showed that its revenue rose by 10% to $11.3 billion.

More results showed that the company’s QCT’s revenue rose by 13% to $9.8 billion, while its IoT revenue rose by 7% to $1.68 billion.

The company has also boosted its forward guidance, and now expects that its first quarter revenue will be between $11.8 billion and $12.6 billion. 

Most of this growth will come from its Qualcomm CDMA Technologies (QCT) business, which it expects will make between $10.3 billion and $10.9 billion. 

The smaller Qualcomm Technology Licensing (QTL) business is expected to make between $1.14 billion and $1.16 billion. This business has an EBIT margin of between 74% and 78%, higher than QCT’s 30% to 32%.

Analysts expect its growth to slow

On the other hand, data compiled by Yahoo Finance show that the company’s revenue in the current quarter will be $12.15 billion, up by 4.11% from the same period last year. 

Analysts also expect that the annual revenue will grow by 2.92% to $45.43 billion, followed by $46 billion in the next financial year. These estimates mean that the company is not expected to benefit substantially from its AI investments. 

This slow growth explains why the company’s valuation metrics are not as fancy as those of other chip companies like Nvidia and AMD. Its forward price-to-earnings ratio has dropped to 14.43, lower than the sector median of 24. Its forward EV to EBITDA metric of 11.60 is much lower than the industry median of 19.

As such, these numbers mean that the company will need to come up with more innovative products to boost its growth. While its recently launched AI chips are good, chances are that they will not capture market share against other companies like AMD and Nvidia.

Analysts have a mild opinion about the company, with the average estimate among analysts tracked by Yahoo Finance being $191, up by 9% from the current level.

Qualcomm stock price technical analysis 

The daily chart shows that the QCOM stock price has rebounded from a low of $118.80 in April to $175 today. It has formed an ascending channel and remained above the 50-day and 100-day Exponential Moving Averages (EMA).

The stock remains above the Supertrend indicator, a sign that the bullish trend is continuing. Therefore, the most likely scenario is where the stock continues rising, with the next level to watch being at $185, the upper side of the channel.

However, the stock has formed a head-and-shoulders pattern, a common bearish reversal sign. This means that, while the stock has more upside, there is a risk that it may retreat, potentially to $160.

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