What happened
Shares of mobile chip leader Qualcomm (NASDAQ:QCOM) soared nearly 8% higher today, building on the company’s gains since reporting on the final quarter of its 2021 fiscal year (the 12 months ended Sept. 26, 2021). The stock is now up nearly 40% in the last month.
The latest jump comes following Qualcomm’s investor day presentation. Qualcomm’s relationship with Apple (NASDAQ:AAPL) has been tenuous in recent years, and indications are that Apple might eventually part ways with Qualcomm. However, in the presentation, Qualcomm indicated it should continue to grow in the coming years with or without Apple — leading to shareholder cheer.
Image source: Getty Images.
So what
Smartphones have long been the secular growth trend behind Qualcomm’s rise to mobile chip design dominance. But global smartphone growth has matured with billions of people already using mobile networks now. Additionally, Apple claims just over half of smartphone market share in the U.S. Potentially losing out on those lucrative iPhone sales has loomed large for Qualcomm shareholders, an event that could send the mobile semiconductor company into reverse if Apple says “sayonara.”
But the international scene is a different story. Android devices claim about 85% of global smartphone market share, and Qualcomm said its revenue among these handhelds is growing some 40% more than sales to “a leading competitor” (ahem, Apple). Additionally, 5G network adoption is only just beginning outside of the U.S. Qualcomm sees its total serviceable market growing an average of 12% a year through 2024 and reaching $46 billion (in global spend on mobile chips it designs) by that time.
Now what
Qualcomm has also put in significant work to diversify beyond smartphones. In fact, in its recently concluded 2021 fiscal year, non-mobile phone sales (encompassing radio frequency chips, automotive, and the Internet of Things) made up nearly 40% of the company’s large CDMA Technologies segment. The rapid expansion of these chip types is expected to continue in coming years and further expand Qualcomm’s semiconductor designs into new mobile markets.
Even after the recent jump in share price, Qualcomm stock trades for 24 times trailing-12-month free cash flow. Qualcomm has put in the work and is proving it will remain a healthy mobile chip leader for years to come, even if its relationship with a certain tech giant named after a fruit comes to an end.
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