A few years ago, Qualcomm, Inc. (NASDAQ:QCOM) seemed like a sure bet. Hey, with its CDMA platform, the company was at the heart of the fast-growing mobile market. QCOM stock was essentially a cash machine.
Yet lately the company has been in a slump. Since the summer of 2014, QCOM stock has lost about a third of its value. Of course, the tech industry is chock-full of examples of darlings that fell on hard times.
And yes, it can take time to get back into growth mode again. Although, when this happens, the gains can certainly be standout. Just look at the comeback of Microsoft Corporation (NASDAQ:MSFT), which is up about 90% during the past couple years.
So in the case of Qualcomm stock, is there much upside or should investors remain wary? Let’s take a look at three pros and three cons and find out:
QCOM Stock Pros
Mobile Powerhouse: The roots of QCOM go back to the mid-1980s, when seven engineers teamed up to capitalize on the mobile industry. At first they focused on technologies to provide location-based services and messaging for the trucking industry. Then after a few years, QCOM would go big — that is, develop a standard, called CDMA, which would allow for better cellular communications.
The business model was to license the technology, which would mean getting aggressive with patents. While success was not immediate, QCOM was determined to make CDMA a critical part of the mobile industry. And of course, this wager ultimately paid off handsomely. For example, just some of QCOM’s marquee customers include Apple Inc. (NASDAQ:AAPL), Samsung Electronics (OTCMKTS:SSNLF), Xiaomi and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG).
Megatrends: The mobile market is expected to grow at a nice pace, which should mean continued demand for Qualcomm offerings. There are currently about 4 billion 3G/4G connections using CMDA systems and this is expected to increase to 6.4 billion by 2020. But there should also be substantial benefits from the emergence of 5G technologies. These will allow for better performance for the Internet of Things (IoT), wearables, autonomous vehicles, virtual reality and even remote medical procedures. While QCOM’s R&D investments will be vital for capitalizing on these trends, the company has also ramped upped its deal-making. No doubt, the most notable example of this is the proposed $38 billion acquisition of NXP Semiconductors NV (NASDAQ:NXPI). Note that the company is one of the top players in the fast-growing market for self-driving cars.
Financials: Granted, QCOM’s revenues are not growing at a fast clip. In the latest quarter, there was a 4% increase. But then again, the company is fairly mature, so it can be tough to churn out strong growth. Yet QCOM remains a highly profitable business, with fiscal 2016 net income coming to $6.7 billion. The company has also been shareholder friendly. Keep in mind that the current yield is at an attractive 4%.