If you want to bolster your portfolio’s tech-sector holdings but feel that the “Magnificent Seven” stocks are too pricey, Qualcomm (NASDAQ:QCOM) is a perfect pick. A thorough Qualcomm stock analysis reveals a great investment opportunity. It checks all of the boxes, whether you’re interested in growth, a good value, or passive income.
Besides, Qualcomm has a long-term arrangement with a famous “Mag-Seven” company. This partnership could keep Qualcomm stock afloat for years to come. Ultimately, Qualcomm proves to reluctant investors that not all large-cap technology companies are overpriced, and there are “magnificent” values if you know where to find them.
Qualcomm CEO Is Confident About Chip Supply and Demand
As you are probably aware, the demand for artificial intelligence (AI) chips has been quite intense. Qualcomm CEO Cristiano Amon recently acknowledged this, suggesting that AI-compatible chips are a “great tailwind” for the company.
Indeed, Amon sees the generative AI trend as “one of the most exciting things” for Qualcomm. The demand is certainly there for AI-enabled hardware, but some investors may be concerned about whether there’s enough manufacturing capacity to meet that demand.
On that topic, Amon warned, “We’re going to have to double the total capacity of manufacturing of chips before the end of the decade.” Fortunately, the Qualcomm CEO assured, “[W]e think that there’s enough capacity,” and, “[R]ight now, we don’t have a capacity problem.”
Just as the gen-AI phenomenon will benefit the “Mag Seven,” it will also benefit Qualcomm. Remember, Qualcomm manufactures a variety of tech-hardware components. So, if the demand for AI chips and other components grows, Qualcomm will have opportunities to scale up and generate significant revenue.
Apple Deal Could Put a Floor on QCOM Stock
There are plenty of data points that bolster the bull case for Qualcomm stock. For example, there a good value proposition here, as Qualcomm’s GAAP trailing 12-month price-to-earnings (P/E) ratio of 23.69x isn’t unreasonable at all. To provide some perspective, the sector median P/E ratio is 28.56x.
Furthermore, Qualcomm offers a forward annual dividend yield of 2.05%. This beats the technology sector’s average dividend of 1.025% – and by the way, some “Mag Seven” companies don’t pay any dividends at all.
Adding to the value proposition of QCOM stock – and possibly putting a floor on its price – is Qualcomm’s extended partnership with Apple (NASDAQ:AAPL). Specifically, Qualcomm has a deal with Apple to supply chips for Apple’s smartphones and other products.
This deal is currently extended through 2026. Granted, it’s not an exclusive agreement, so Apple could also source these components from other suppliers. Nevertheless, the extended arrangement with Apple is a definite win for Qualcomm. Over the long term, it could provide some stability to the Qualcomm stock price.
Qualcomm Stock Analysis: Multiple Reasons to Buy Today
What did our Qualcomm stock analysis reveal? First, not all mega-cap technology companies offer dividends, but Qualcomm does. Also, Qualcomm is not overvalued among tech-sector companies.
Moreover, Qualcomm’s CEO is confident about the company’s ability to meet the demand for AI-enabled hardware components. On top of all that, Qualcomm’s agreement with Apple should help to stabilize QCOM stock. Therefore, if you’re looking for a winning move in 2024, just start a share position in Qualcomm.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
