Qualcomm Is Here To Stay

Core Viewpoint - Qualcomm is a leading RF chip company with a strong history and expertise, focusing on the growth potential in the Internet of Things (IoT) while its phone-based business matures [2][25]. Group 1: Company Overview - Qualcomm was founded in 1985 and has been pivotal in developing technologies for mobile communication, including 3G, 4G, and 5G [2]. - The company operates primarily in two segments: QCT, which produces RF chips, and QTL, which licenses the technology for phone networks [4][3]. - QCT accounts for 86% of Q3 revenue with an EBT margin of 27%, while QTL contributes 14% with a 70% EBT margin [4]. Group 2: Financial Performance - Qualcomm has experienced an 8.1% CAGR in revenue over the last five years, with analysts projecting continued growth of 7-10% [14]. - Income has also shown a 10.5% CAGR, with a forecasted growth of 19% in 2024 and around 11% thereafter [15]. - The company has grown its cash from operations at a CAGR of 9.2%, aligning with income growth [18]. Group 3: Capital Allocation - Qualcomm has $13 billion in debt, with a debt/earnings ratio of 1.5, indicating a manageable level of debt [19]. - The company pays an 85-cent quarterly dividend, yielding approximately 1.97% annually, and has repurchased $1.8 billion in shares [19]. Group 4: Growth Opportunities - The future growth of Qualcomm is heavily tied to the IoT sector, which is expected to require extensive RF connectivity and computing power [25]. - The company has made strategic investments, including the acquisition of Nuvia in 2021, to enhance its IP portfolio [4]. Group 5: Evaluation Methods - Three evaluation methods indicate Qualcomm's shares may be undervalued, with potential upside based on cash flow and earnings growth projections [31][32]. - The Margin of Safety method suggests a fair value of $127.63, while the Payback Time method indicates a fair value of $322.46 [28][29].