Qualcomm, Inc. (NASDAQ:QCOM) stock has seen better days. The news that’s rolled in over the past year hasn’t exactly placed QCOM stock in good light.
Three markets in Asia — China, South Korea and Taiwan — account for a large majority of QCOM’s revenue. Each of these countries have sued Qualcomm over its pricing on licenses and royalties for its chipsets.
In 2015, China fined the company nearly $1 billion and made it change its royalty pricing on phones sold using its chips. QCOM traditionally gets up to 5% on the sales of each phone its chips are in.
South Korea also fined the company nearly $1 billion, which the Qualcomm has paid. And recently, Taiwan fined QCOM $800 million for the same issues.
And this doesn’t include Apple Inc.’s (NASDAQ:AAPL) case regarding QCOM pricing — Apple has refused vendors who build iPhones with QCOM chips in retaliation. Just that action pulled $500 million off of Qualcomm’s revenue guidance in the spring.
It also paid BlackBerry Ltd (NASDAQ:BBRY) nearly $1 billion for similar transgressions. And apparently there’s another major smartphone maker that is also suspending payments until QCOM renegotiates its royalties with it.
And this doesn’t even take into account actions by the U.S. and European Union officials.
There’s obviously a trend in place here. And that trend doesn’t look like it affords QCOM stock much optimism.
But things may not be as dark as they look and the 20% drop in the price of QCOM stock in the past 12 months may not be a signal to run, but to buy the dip.
First, look at the bruising Qualcomm took with China a couple years ago. It had to renegotiate its high-margin licensing business with all its Chinese vendors. And then it had to cut its royalty payments on each phone sold.
Today, China represents one of its highest growth markets. The point is, after a good run, QCOM is simply renegotiating deals with smartphone makers as the market is maturing.
And that brings us to a second bullish point. QCOM is already a growing force in two major sectors that are just starting to grow — virtual/augmented reality (VR/AR) and the Internet of Things (IoT).
It has been trying to make big move into IoT with its merger attempt of NXP Semiconductors NV (NASDAQ:NXPI). But it is starting to drag out.
And even if the merger falls through, QCOM is already making large strides in the IoT space on its own. The same goes for its efforts and VR and AR technology.
So, as it stands right now, QCOM stock has the worst-case scenario baked into its pricing. And that means all its upside potential is being consciously ignored. It’s also likely that any good news in its upcoming earnings announcement will be discounted.
That makes QCOM stock — with its solid 4.2% dividend — a very interesting long-term buy here.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
