Qualcomm (NASDAQ:QCOM) stock has been on quite a run in 2019. QCOM is up over 30% for the year. Much of the growth is attributed to finally putting its lawsuit with Apple (NASDAQ:AAPL) in the rear-view mirror.
But the bigger story for Qualcomm stock is how its products will contribute to the rapid expansion of 5G into home wireless networks. There is still some uncertainty surrounding the specifics of a deal that would end the U.S.-China trade war. However, QCOM stock continues to stand out and is rallying despite any lingering unease.
From Litigants to Long-Term Partners
Two years ago, Qualcomm was embroiled in a lawsuit against Apple. At stake was Qualcomm’s status as chip provider for Apple’s signature iPhones. Qualcomm stock bobbed up and down for two years as investors traded on the news.
Finally, in April of this year, the lawsuit was resolved. And Qualcomm comes out of it with a six-year global patent licensing deal. This includes terms that mean Qualcomm will supply Apple with chips for the iPhone.
Following that announcement, Intel (NASDAQ:INTC) announced it would be leaving the 5G smartphone business. This gave QCOM stock a major lift considering Intel was a real and present threat to Qualcomm in that space. Although the deal does not guarantee QCOM exclusive rights, having Intel out of the picture puts the company in a favorable position.
Analysts expected this news to provide a boost for QCOM stock in 2020. That’s when Apple will launch its first 5G iPhones. However, the stock may get a boost right now. Apple has announced a 10% production increase for its current iPhone series (the iPhone 11).
The iPhone Is Just One of Qualcomm’s 5G Opportunities
The market share and brand loyalty associated with the iPhone name alone is reason to be bullish on Qualcomm stock. However, that is looking like only the beginning of the company’s 5G opportunities.
At the company’s September “Future of 5G Workshop,” Qualcomm made it clear that 5G will change the definition of mobile services. And for investors in Qualcomm stock, that is a bullish sign.
When consumers hear the term 5G, they typically think about speed and smartphones. But there are other benefits of this technology that make it attractive for home broadband networks.
To begin with, 5G will allow consumers to set up their network without requiring an engineer to install. And, the broadband network is portable and available at a lower cost. This is why many experts consider the delivery of broadband to homes one of the most promising potential applications for 5G after smartphones.
But 5G is only now becoming available on a broader scale. Fortunately for Qualcomm stock, the chip maker will be heavily involved in the products that are contributing to this launch. On Oct. 14, QCOM announced that over 30 electronics companies will use QCOM devices (modem chips, radio frequency filters, amplifiers and antenna modules) in products for home broadband networks. These products will launch in 2020.
What to Expect from Qualcomm Stock after November Earnings
QCOM will report earnings on Nov. 6. Analysts expect QCOM to report a top-line number of $4.7 billion with a profit of 70 cents per share. This will be a more “expected” result for the company after its last earnings report. The resolution with Apple saw the company double its revenues to $9.6 billion with an increase in earnings per share of $1.92.
Still, a positive earnings report will be good news for Qualcomm stock particularly with so much in the pipeline. The 5G business is moving from hype to reality. There will be bumps along the road, but 5G in all its forms will be part of the core that defines technology in the 2020s.
Look Beyond the Trade Truce
The best thing about the trade “truce” (it wasn’t really a deal) is that it soothed the anxiety of businesses. The additional tariffs set to take effect on Oct. 15 will stay on hold. This, in theory, should increase business confidence (and spending).
But I’m not sure about that. Some of the larger issues affecting the semiconductor industry remain unresolved. But for now, the markets seem to believe it. If the trade war continues to linger, there could be some turbulence for QCOM stock in 2020. However, right now, increased demand for its products and a positive earnings outlook should be more than enough to propel Qualcomm stock forward.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
