Qualcomm (QCOM): A Rock Amid Turbulent Currents

Advertisement

If you’re spooked by the market’s dizzying one-day drops lately, one way to leverage economic growth but still keep your powder dry is to invest in mature technology stocks that sit on huge cash hoards and control proprietary technology that the world’s consumers increasingly covet.

qualcomm-logoA salient example of a “mature” tech stock with outsized potential is Qualcomm, Inc. (QCOM), a semiconductor company that makes chips for smartphones and other devices.

QCOM stock doesn’t offer the faster growth potential of Silicon Valley small-caps, but the steadiness of Qualcomm stock can shield you from the sort of volatility that the stock market likely faces in coming months. At the same time, QCOM is pursuing an ambitious growth strategy.

Case in point: During the International Consumer Electronics Show (CES) yesterday, Qualcomm announced partnerships with drug retail chain Walgreens Boots Alliance Inc (WAG) and pharmaceutical maker Novartis AG (AGR) (NVS) to use its “2net” wireless health platform.

The computer management of drug treatment programs is a booming area and Qualcomm’s entry into this health sector opportunity should drive Qualcomm stock this year. The company also is migrating into the automative and household goods arenas.

CES is a huge and influential global consumer electronics trade show that takes place every January in Las Vegas. Announcements at CES are closely watched by the technology sector and Qualcomm’s announcement was seen as significant because it signaled the company’s determination to put its chips in products that are actually shipping now.

Today at CES, Qualcomm also announced that its much-ballyhooed superfast Snapdragon 810 chip will make its debut in popular new video games.

Qualcomm stock has been struggling of late, but it still boasts strong underlying fundamentals. The company possesses a portfolio of proprietary technology that’s vital for the operation of increasingly popular consumer gadgets, especially smartphones. The company’s cash also provides a cushion for the market volatility we’ve seen lately and also supports consistently robust spending on research and development.

As more people around the world use smartphones built with the company’s chips, Qualcomm stock should outperform in 2015.

Qualcomm is tapped into the global smartphone craze like no other company. QCOM is the seventh-largest technology company in the U.S., boasting a market capitalization of more than $122.9 billion. The company is divided into two divisions, Qualcomm CDMA Technologies and Qualcomm Technology Licensing.

QCT designs and markets chipsets that are the “guts” of laptops, tablets and smartphones. The QTL division holds patents for mobile telecommunications. The company’s ownership of this intellectual property means that whenever a manufacturer sells a handset that provides high-speed data connections, Qualcomm earns a royalty on the sale, regardless of the device’s brand.

Qualcomm’s chips are integral to smartphones made by Apple Inc (AAPL), Google Inc (GOOG), Nokia Corporation (ADR) (NOK), and Microsoft Corporation (MSFT), making QCOM a great play on the rapid transition of consumers from third-generation to fourth-generation smartphones.

Meanwhile, Qualcomm’s SnapDragon chip is used by more than 50 manufacturers, as well as on smartphones that run Google’s Android operating system.

The Bottom Line

QCOM reported fourth-quarter fiscal 2014 earnings of $1.89 billion, or earnings per share (EPS) of $1.26, for a year-over-year increase of 3%. For full year fiscal 2014, Qualcomm reported revenue of $26.5 billion, up 7% year-over-year, with EPS of $5.27, up 17% year-over-year. These operating results didn’t wow investors but they were respectable enough to bode well for the coming year, when the company’s investments and strategic plans should really bear fruit.

With proprietary technology, unassailable market penetration and aggressive forays into new market opportunities beyond just smartphones, QCOM appears to be sitting on a solid foundation for future growth amid an unsteady stock market.

As of this writing, John Persinos did not hold a position in any of the aforementioned securities.

 More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/01/qcom-qualcomm-stock-ces-rock-amid-turbulent-currents/.

©2024 InvestorPlace Media, LLC