For many investors, when you hear the name Qualcomm (NASDAQ: QCOM) you think back to the heyday of the internet bubble when stock prices shot up if they even mentioned they had anything to do with the internet.
We’ve come a long way since then, but Qualcomm has stayed the course while other firms have fallen by the wayside. And even though they are a tech leader, you wouldn’t know this by looking at their stock price.
The stock has been stuck in a trading range for a while now, even though they have had great results and have a bright future. Let’s dive into Qualcomm in more detail to see what is going on.
Qualcomm By The Numbers
If you were to look at the numbers for Qualcomm, you would see some nice things. First off they have a return of equity of at least 14% in 9 out of the last 10 years. And they have a return of equity of at least 18% in 6 out of the last 10 years.
After reporting first quarter earnings, the CDMA technology segment reported that pre-tax earnings were up 23% and the technology licensing segment saw pre-tax earnings increase by 14%.
Qualcomm also has $20 billion sitting in cash and is paying a hefty 4% dividend.
The bad news, if you can call it that, is that the outlook for 2017 isn’t as exciting. They expect revenue to grow 2% and earning to grow 3%.
The Future Of Qualcomm
Qualcomm has its hand in everything related to tech. Don’t believe me?
- Processors: they supply processors for many smartphones
- Cellular modems: they build modems that allow you to make and receive calls and send and receive texts
- Bluetooth: they are a leader in Bluetooth technology
- WiFi connectivity: they build wifi solutions such as powerline adaptors and other devices to help you connect to wifi.
As more and more devices are connecting to the internet and becoming “smart” devices, there will be a continued interest and demand for what Qualcomm offers.
In addition to the above, the company is hard at work developing 5G technology which will be even faster than the current 4G standards we have in place today.
So with a bright future and decent earnings, why the lack of interest in the stock?
The main reason is worry. Not so much that the company won’t perform well, but rather that they are open to lawsuits. This is because Qualcomm is the leader in this industry by miles. They have been developing technologies that other companies can’t.
And when they do develop something, many other companies who don’t understand the technology think that Qualcomm is stealing their ideas or infringing on their patents.
Earlier this year, Apple filed a lawsuit regarding royalty payments. This has investors spooked when it comes to Qualcomm and thus has led to the stock not performing as well as it should be based on their earnings.
Should You Invest In Qualcomm?
If you are a long term investor, I think Qualcomm is an excellent buy. They have strong financials and have a bright future.
While there is the Apple lawsuit, I don’t think that this is a start of a trend where every company will begin to sue Qualcomm. Once they are able to get past one or two lawsuits, they will change and adapt and this will limit any future litigation.
Finally, the company is paying a great dividend. You can collect 4% just by parking your money in this company.
At the end of the day, this company isn’t going anywhere. They are the industry leader and will remain so for many years to come.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.