Qualcomm: Strong Tailwinds Can Prove Naysayers Wrong

Core Viewpoint - Qualcomm is currently in a correction phase, trading over 20% below its June peak despite beating revenue and earnings estimates, presenting a potential value opportunity for long-term investors [2][18]. Group 1: Business Segments Performance - The automotive segment reported $811 million in revenue, an 87% year-over-year increase from $434 million, driven by the trend of automakers adding smart features to their vehicles [3][17]. - The IoT segment experienced an 8% year-over-year decline in revenue, but new products like Meta's Ray-Ban smart glasses are expected to drive future growth [5][6]. - Qualcomm's EPS estimates for FY25 and FY26 are $11.24 and $12.5 respectively, indicating a forward PE of 15.08 and 13.5, which are among the lowest in the chip industry [9][18]. Group 2: Growth Potential and Market Sentiment - There have been 27 upward revisions for EPS and 26 for revenue in the last three months, indicating positive market sentiment towards Qualcomm [12][11]. - The company has a strong dividend yield of over 2% and a history of consistent dividend growth, with a CAGR of 7% over the last decade [15][18]. - The stock's current valuation at 13.5 times the FY26 EPS estimate positions it as an attractive investment compared to peers like AMD, which trades at over 40 times [15][18]. Group 3: Risks and Challenges - Potential risks include competition from Apple and Samsung, who are investing heavily in their own chip development, which could impact Qualcomm's revenue concentration from these companies [13][14]. - The long-term revenue generation from the automotive and IoT segments remains uncertain, posing a risk to the stock's growth trajectory [13][14]. - Despite strong EPS growth, there is a concern that Qualcomm could become a value trap if Wall Street does not increase its valuation multiple [14].