A typical story on Qualcomm (NASDAQ:QCOM) will usually revolved around its technological innovations, particularly for the 5G rollout. That’s not surprising in part because of the immediacy bias. It seems as if everyone is talking about this next generation in wireless tech. And with QCOM beating out its rivals in the 5G modem space, Qualcomm stock represents a viable, long-term buy.
I’ve also discussed the 5G catalyst and the myriad opportunities it presents, such as smart city infrastructure development. However, one of the company’s perhaps lesser appreciated segments — full autonomous driving systems — should turn out to be among its most compelling.
This would be a surprising twist for Qualcomm stock. After all, QCOM’s management team last year declared that companies engaging in the platform — namely, Nvidia (NASDAQ:NVDA) and Intel’s (NASDAQ:INTC) Mobileye — are akin to “guests who arrived at a casual party too early and dressed in a tuxedo.”
But in this year’s Consumer Electronics Show, Qualcomm announced a full autonomous driving system that will compete with the same folks management earlier derided. Obviously, this opens synergies with the company’s wireless technology divisions. Currently, the tech firm is working on “cellular vehicle to everything” (C-V2X) solutions.
Of course, QCOM won’t make an immediate jump to fully autonomous vehicles as such groundbreaking innovations take time to develop. However, the company’s suddenly concerted efforts to dive into this segment is encouraging for Qualcomm stock due to revenue gradation opportunities.
What I mean is that before we hit the fully autonomous phase, we’ll flesh out advanced driver-assistance systems, or ADAS. These safety systems are revolutionizing the auto industry, and in turn, provide QCOM with revenue opportunities as the market gears up for full autonomous.
ADAS Are a Win-Win for Qualcomm Stock
Some of my longtime readers may remember that I was in the market for a new (at least, new to me) car. Eventually, I found a Mercedes-Benz that was perfect for my needs.
Strange as it might seem, the biggest takeaway for me was not how fast it is — although it’s pretty darn quick — nor how sweet it looks. Rather, it’s that the modern car is comprehensively more convenient than even ultra-premium luxury cars from a decade ago.
Previously driving a mid-2000s era car, I never imagined how ridiculously convenient blind-spot detection mirrors are. Now, I can’t live without it. Additionally, my Mercedes beeps at me when it detects sudden disturbances in my lane. It will also decelerate for me if I don’t react fast enough.
More importantly, according to an AAA Foundation for Traffic Safety report, ADAS saves lives. One of the report’s collaborators, University of Alabama at Birmingham graduate student Austin M. Svancara, encouraged consumers to “consider the benefits of these technologies as they look to purchase new vehicles.” Rising interest in these features should help drive Qualcomm stock.
Really, the economics make perfect sense. Consider that an average non-fatal crash that results in disabling injuries costs drivers nearly $62,000. A fatal one averages costs of more than $1.1 million. By purchasing a vehicle armed with ADAS, even the premium to attain those features will pay off by helping to prevent serious and costly accidents.
And with QCOM teaming up with General Motors (NYSE:GM), the proposition for Qualcomm stock makes even more sense. Although GM has some fancy cars, they primarily produce affordable vehicles. As the cost of ADAS gradually declines, this life-saving tech can reach a wider consumer base.
Mind the Coronavirus
Still, despite my longer-term bullishness for Qualcomm stock, I’m reminded that the markets are unpredictable. Case in point is the coronavirus that has shuttered China and threatens to negatively impact the global economy.
Obviously, this bodes poorly — at least in the interim — for Qualcomm stock. In fiscal year 2019, the tech firm generated total revenue of $24.27 billion. Of that amount, $11.61 billion, or nearly 48%, came from China. It’s by far the biggest region for the organization in terms of sales. Thus, any impact here will be tough to overcome.
Odds are, though, that health officials will get a handle on the epidemic. Thus, should QCOM shares get volatile on the panic, you may wish to consider picking up the discount.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
