Qualcomm Stock Forecast for 2019

Qualcomm Stock
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Qualcomm Stock Forecast for 2019

The QUALCOMM, Inc. (NASDAQ:QCOM) stock forecast for 2019 looks bullish as the world prepares for the impending launch of 5G technology.

5G is the next generation of mobile broadband. It’s expected to transform the tech industry, boosting Internet speeds a hundredfold and bringing the Internet of Things (IoT) closer to full-fledged reality.

So, what does that have to do with Qualcomm stock? The mobile chip maker, best known for making processors in high-profile phones—including the “Samsung Galaxy Note 9” and “Google Pixel 3″—will have its “X50” modem (designed specifically for 5G technology) in many 5G devices.

2019 is shaping up to be a very exciting year for Qualcomm, which is why a QCOM stock price forecast of $70.00 is not out of the question.

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October Meltdown Made QCOM Stock Even More Attractive

October’s broad-based stock market meltdown wreaked havoc on Wall Street, but tech stocks seemed to be more severely punished. And the sector hasn’t exactly rebounded.

Trading around $58.00, Qualcomm stock is still down approximately 24% from its September highs (and many analysts didn’t think the stock was very expensive back then). Now it’s trading at just 13-times 2019 earnings estimates.

While Qualcomm reported healthy fourth-quarter financial results (for the period ended September 29), with 5G technology kicking in in 2019, the company could be one of the biggest feel-good stories on Wall Street next year.

In 2019, Qualcomm is focused primarily on industry’s drive to adopt and transition into 5G.

What is 5G and why should investors care? It’s no stretch to say that 5G will revolutionize the tech industry.

When it comes to mobile phones, 5G technology will have 10-times the speed and carriers will be able to provide it at 1/30th the price.

Some have even predicted that 5G will make cellular connections 100-times faster than typical cellular connections—and faster than physical fiber optic cables in your home. (Source: “Qualcomm CEO: 5G Disruption,” Mad Money, November 29, 2018.)

5G also decreases lag time. That is the time between when you click on a link or streaming video on your phone and it responds. The current lag time is around 20 milliseconds. With 5G, that lag time is reduced to as little as one millisecond.

That makes a big difference if you’re playing a game on your phone.

5G Cellular Launch in 2019, Second Wave to Start Soon After

5G technology on cellular devices will start rolling out in the spring of 2019 in the U.S. and Korea. By mid-year, 5G will launched in Europe. In the second half of the year, it will be deployed in China.

The second 5G wave will launch a year or two later. Every industry that wants to connect to the Internet and be more competitive—which is basically all of them—will need to adopt 5G technology.

5G will finally help the IoT realize everything it has been promising for the last few years. That’s because 5G technology provides the much-needed infrastructure to carry larger amounts of data and allow carriers to add more people and devices to their networks.

5G will help self-driving cars talk to each other in real time and allow cities and municipalities to operate more efficiently.

Because of its low latency, 5G will advance the evolution of remote control technology (to control machinery from anywhere in the world), wearable devices, and more. Thanks to the virtually non-existent lag time, 5G will allow doctors to safely perform remote surgeries.

The tech companies that will realize the biggest gains will be the industry’s first movers. In the first cellular wave, many phones will use Qualcomm’s X50 modem, which is designed to work with the 5G spectrum. (Source: “Qualcomm is making 5G in phones a reality — for next year,” CNET, August 22, 2018.)

Can’t you just use your current cell phone to pick up the 5G spectrum? Nope. To tap 5G, you need to use specific antennas that aren’t widely available yet, but they’re being rolled out. On top of that, to take advantage of 5G cellular speeds, you need a 5G phone.

Qualcomm Financials

Qualcomm reported solid financial numbers for the fourth quarter and fiscal year ended September 29. However, fourth-quarter revenue slipped two percent year-over-year to $5.8 billion. (Source:Qualcomm Announces Fourth Quarter and Fiscal 2018 Results,” QUALCOMM, Inc., November 7, 2018.)

The chip maker reported a fourth-quarter net loss of $493.0 million, or $0.35 per share. In the fourth quarter of 2017, Qualcomm reported net income of $168.0 million, or $0.11 per share. The company said the net loss came from higher total costs and expenses.

“We delivered a strong quarter, with Non-GAAP earnings per share above the high end of our prior expectations, on greater than expected chipset demand in QCT and lower operating expenses,” said CEO Steve Mollenkopf.

“We are executing well on our strategic objectives, including driving the commercialization of 5G globally in 2019 and returning significant capital to our stockholders.”

Full-year revenue increased two percent year-over-year to $22.7 billion. Qualcomm reported a loss of $4.8 billion ($3.32 per share) for fiscal-year 2018, compared to a net income of $2.5 billion ($1.36 per share) for 2017. The loss is attributed to higher income tax expenses.

At the end of the fourth fiscal quarter, Qualcomm had $11.8 billion in cash and cash equivalents, with long-term debt of $15.4 billion. At the end of the fourth quarter of 2017, the company had cash and cash equivalents of $35.0 billion and long-term debt of $19.4 billion.

During the fourth quarter, Qualcomm repurchased 254.6 million shares at a cost of $20.2 billion. It also returned $866.0 million ($0.62 per share) to investors in the form of dividends.

Trading around $58.00, Qualcomm has a market cap of $70.6 billion and provides an annual dividend of 4.3%.

Looking ahead to the first quarter of fiscal-year 2019, ended December 31, 2018, Qualcomm expects revenue to be in the range of $4.5 billion to $5.3 billion, with earnings per share between $0.78 and $0.88.

Qualcomm Stock Analysis for 2019

Buy-and-hold investors have been on a volatile ride in 2018, with Qualcomm stock losing almost 24% of its value over the first four months of the year. The company’s share price rebounded in early May, and by September, it had soared 53.6% to an intra-day high of $75.68.

Then the October sell-off occurred and QCOM stock tumbled. The share price has rebounded a little, but it’s still down 23% from its September highs and is down 10.5% year-to-date.

Of the 22 analysts covering Qualcomm, the majority have a 12-month share price forecast of $70.00, a 21.5% upside from current levels. A high estimate of $87.00 per share over the next 12 months represents a potential gain of 51%. (Source: “Qualcomm Inc,” CNN, last accessed December 11, 2018.)

On the other end of the scale, some analysts have forecast a 12-month share price target of just $55.00. That would be a 4.5% loss from current levels.

Chart courtesy of StockCharts.com

Qualcomm’s share price is still in recovery mode. While it is down more than 10% year-to-date and off more than 20% since September, it has found a lot of long-term support at its 200-week moving average. It has also tested a support level of $54.00 per share twice since June.

Why QCOM Stock Could Hit $70 in 2019

Over the last few months, investors have run for the telecom exits. That might have been a little premature when it comes to Qualcomm.

Granted, its share price performance is not exactly something investors have been able to rely on with any certainty in 2018. It made a great run from May to early October but was severely hindered by the market sell-off, and hasn’t really recovered yet.

But there’s a lot of upside potential for Qualcomm stock in 2019; a price target of $70.00 could even be a little too conservative. It hinges, in large part, on the company’s 5G cellular technology and the global rollout of the 5G spectrum—all of which starts in early 2019.

Qualcomm has partnerships with Samsung Electronics Co Ltd (OTCMKTS:SSNLF), Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), Alphabet Inc (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT)—all of which expect to launch their first 5G phones in 2019.

Qualcomm’s “Snapdragon 855” chips will be the driving force behind most major “Android” phones in 2019. Its new “8cx” processor, designed specifically for “Windows” 2-in-1s, will help expand the chip maker’s foothold into PC computing.

What’s exciting is that the 5G rollout will occur over two waves, the second of which will start in 2020 or 2021. This should provide momentum for the QCOM stock price over the coming years.

To that end, Qualcomm has invested in more than 120 portfolio companies around the world, with focuses on virtual reality, IoT, drones, automotive, cloud computing, and mobile health. Almost each one of these areas will benefit from 5G technology.

China Bans Sales of Apple iPhones

Then there is Qualcomm’s ongoing battle over patent royalties with Apple Inc. (NASDAQ:AAPL). It’s now in the rear-view mirror.

Almost.

Recently, an intellectual property court in China found that Apple was in violation of two of Qualcomm’s patents. The court issued an injunction on sales in China of Apple models from 2015’s “iPhone 6S” through 2017’s “iPhone X.” These phones account for between 10% and 15% of Apple iPhone sales in China. (Source: “China bans sale of most iPhone models after granting Qualcomm an injunction against Apple,” CNN, December 11, 2018.)

Qualcomm says the patents in question allow people to edit and resize photos on a phone and manage apps by using a touchscreen.

Apple naturally wants the Chinese court to reconsider its decision. For its part, Qualcomm has applauded the ruling and says Apple owes it money for using its technology.

Qualcomm’s first-quarter revenue estimate of between $4.5 billion and $5.3 billion excludes revenue from royalty sales on Apple products and on sales by other licensee disputes.

Analyst Take

Should QCOM stock be considered a long-term play? The company is a technology juggernaut with a storied history of providing investors with long-term capital appreciation. It also provides a strong dividend of 4.3%, which it has increased for 16 consecutive years.

Qualcomm’s share price took a hit during the recent stock market meltdown. All that did though was put a great stock in a better price range. While the company’s long-term outlook remains bullish, the Qualcomm stock forecast for 2019 remains exceptionally bright.

Investors waiting on the sidelines to hear positive buzz from the street about Qualcomm and 5G could very well miss out on an early run in QCOM shares.