A 5.4% jump in Wednesday’s session was enough to make shares Qualcomm (NASDAQ:QCOM) one of the standout performers in US equities. Even as we appear to be on the verge of a great rotation from growth to value stocks, the $170 billion chipmaker is every bit as attractive as it’s been all year.
Shares are up well more than 150% in the 8 months since March’s lows and closed out yesterday at an all-time high. Aside from COVID-19 and this past summer’s breathtaking rally in tech shares, their year has for the most part been defined by the much anticipated 5G rollout. As we finally seem to have entered the go-live phase for that, it means there’s a fresh lease of life being breathed into their shares, even with them already at all-time highs.
Leaving the 5G narrative aside for the moment, the internal numbers coming from the company are equally impressive. Their fiscal Q4 earnings last week left no doubts as to the strength of their revenue engine, as both top line and bottom line numbers smashed analyst expectations. Management also saw fit to raise forward guidance, a move that tends to get the bulls excited and the bears scared.
Making Hay While The Sun Shines
As CEO Steve Mollenkopf said with the release:
“our fiscal fourth-quarter results demonstrate that our investments in 5G are coming to fruition and showing benefits in our licensing and product businesses. We concluded the year with exceptional fourth-quarter results and are well-positioned for growth in 2021 and beyond. As the pace of disruption in wireless technology accelerates, we will continue to drive growth and scale across our RF front-end, Automotive and IoT adjacencies.”
To that end, this week already has seen the fresh announcement that Qualcomm is collaborating with network television provider DISH (NASDAQ:DISH) on the development of their O-RAN compliant 5G network. This is a nice additional string to their bow and investors will be hoping there are more like it in the not too distant future.
S&P Global summed up the 5G opportunity recently when they said:
“connecting to various wave-lengths requires 5G devices to pack in a different radio-frequency unit and set of antennas for every frequency in which it operates. And Qualcomm, one of the first companies to predict and prepare for the challenge of the new ultra-high frequencies, is especially well-positioned to provide the circuitry for the future of 5G devices”.
Heavyweights Row In
For any investors still on the sidelines, there have been plenty of new voices coming out on the long side recently. Morgan Stanley have reiterated their Overweight rating and given shares a new price target of $159, well above Wednesday’s all time printed high. Analyst Joseph Moore was impressed with a “very strong quarter across the board" and noted how 2021 is lining up to be the “sweet spot” for Qualcomm and 5G after many years of patient preparation.
Rosenblatt have also reiterated their Buy rating and given shares a similarly bullish $155 price target while Cowen went one further with a price target of $170, implying upside of more than 15% from last night’s closing price.
There are some who will urge caution and suggest that shares are getting frothy at these levels. And with the stock’s RSI above 70 and their price-to-earnings ratio at 34, there’s possibly some merit in the argument. But still, this is the dawn of one of the most eagerly anticipated new technologies of the past decade and Qualcomm stands poised to capitalize on it. For every reason to stay on the sidelines there are ten reasons to get long.
