Should QCOM Stock Be in Your Portfolio After a Three-Month Slump?

Core Viewpoint - Qualcomm's stock has declined 20.6% over the past three months, outperforming the industry decline of 34.7%, but facing significant challenges due to the U.S.-China trade tensions and high R&D costs [1][2][8]. Group 1: Market Performance - Qualcomm's stock performance has been relatively better compared to peers like Hewlett Packard Enterprise and Broadcom, which saw declines of 42.6% and 36% respectively [1]. - The company's revenues are heavily reliant on the Chinese market, accounting for 66% of total revenues in fiscal 2024, making it vulnerable to market uncertainties [6]. Group 2: Trade and Tariff Impact - The ongoing U.S.-China trade conflict has led to tariffs that adversely affect Qualcomm's revenues, with a 34% retaliatory tariff imposed by China following U.S. tariffs [2][3]. - The trade restrictions have banned the sale of high-tech equipment and chips to China, further complicating Qualcomm's operational landscape [2]. Group 3: Competitive Landscape - Qualcomm faces intense competition from low-cost chip manufacturers and established players like Broadcom and Hewlett Packard, which is expected to pressure its profit margins [8][9]. - The shift in market share among original equipment manufacturers at the premium tier has reduced Qualcomm's near-term opportunities in selling integrated chipsets [8]. Group 4: Growth Opportunities - Despite short-term challenges, Qualcomm is positioned for long-term growth through its Snapdragon portfolio and investments in mobile licensing programs [11]. - The automotive sector is a significant growth area, with automotive revenues increasing by 61% to $961 million in the first quarter of fiscal 2025, driven by new vehicle launches [14]. Group 5: Earnings Estimates - Earnings estimates for Qualcomm for fiscal 2025 have increased by 12.4$11.78, and for fiscal 2026, estimates have risen by 5% to $12.50, indicating positive market sentiment [15]. Group 6: Strategic Initiatives - Qualcomm is expanding into AI capabilities with the launch of the Snapdragon X chip for mid-range AI desktops and laptops, aiming to diversify its revenue streams beyond the smartphone market [13]. - The company is also focusing on enhancing its automotive telematics and connectivity platforms to capitalize on emerging trends in the automotive industry [14].