Qualcomm Inc QCOM, will be reporting its first-quarter earnings on Jan. 31. Wall Street expects $2.37 in EPS and $9.51 billion in revenues as the company reports after market hours.

The San Diego-based company is poised to benefit significantly from the ongoing AI revolution and the resulting secular tailwinds. The convergence of AI technologies and mobile devices is expected to drive an upgrade cycle, and Qualcomm is well-positioned to capitalize on this trend.

Qualcomm’s growth prospects extend beyond mobile devices, with substantial opportunities in the PC, automotive, and Internet of Things (IoT) sectors. Qualcomm’s reasonable valuation, coupled with its strong performance and competitive product releases, reinforces its position as a long-term buy.

Here's what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.

Qualcomm Investment Thesis 

The last fiscal quarter indicates positive momentum for Qualcomm’s business, with a notable increase in non-GAAP EPS and robust guidance for rapid growth in fiscal Q1. Qualcomm’s Snapdragon 8 Gen 3 smartphone chips and Oryon series for laptops have demonstrated competitiveness in the market, reflecting the company’s commitment to innovation.

Automotive Business Growth

Qualcomm’s automotive business has seen significant growth, marked by partnerships with major players like BMW, Mercedes, Cadillac, and Jaguar. In fiscal Q4, the automotive segment experienced a 23% sequential growth, reaching $535 million. With these wins, Qualcomm appears on track to meet its long-term automotive growth targets. The AI revolution in visual processing is anticipated to enhance automotive capabilities, driving increased silicon content demand in new vehicles.

AI Revolution

As the AI revolution progresses, Qualcomm’s capabilities to handle on-device AI inference workloads become more credible. This positions the company favorably to meet the demand for more powerful mobile devices capable of running advanced AI models on-device.

The full impact of the AI revolution on Qualcomm’s financials may take time. But, the company’s current positioning suggests it is well-equipped to capitalize on the rising demand for semiconductor chips.

Valuation

The market could potentially underrate Qualcomm due to a gradual impact expectation. However, the company’s reasonable valuation and strong fundamentals make it a noteworthy player in the AI space, presenting an attractive investment opportunity for the long term.

The stock trades at a forward P/E of 14.21currently, with peers such as Intel INTC and Texas Instruments TXN trading at 18.90 and 24.39, respectively.

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Qualcomm Analysts' Focus & Consensus Ratings

Q1 Analysts' Focus: KeyBanc Capital Market analyst John Vinh, CFA sees “upside to results and guidance given: 1) persistent Android recovery; and 2) spot deals from Huawei (estimated $400M-$500M) across 1Q/4Q, given supply constraints at SMIC.”

Vinh also sees Qualcomm reaping “continuous benefits from the ramp of SnapDragon 8 Gen 3 APs and pull-ins from iPhone and Samsung.” Headwinds in 2024, as noted by the analyst include, the loss of share at Samsung on the GS24, and indirect share shift as Huawei internal AP ramps. The KeyBanc analyst expects Qualcomm “to retain 100% share at iPhone 16.”

Ratings & Consensus Estimates: Consensus analyst ratings on Qualcomm stock stand at a Buy currently with a price target of $135.97 a share. The more recent ratings received in January 2024, however, have a price target ranging from $150 to $175 on the stock.

QCOM Price Action: Qualcomm stock closed the trading day of Jan. 29 at $150.44 a share.

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