Qualcomm (NASDAQ). It is the world’s No. The No.2 supplier of smartphones processors. Qualcomm is an $16.5 billion annual business selling processors and 5G chipsets.

This company’s stock is trading at 26.8% discount to its 52-week high of $167.94. (See Analysts’ Top Stocks on TipRanks)

Snapdragon is a Strong Brand

Qualcomm’s market share in smartphone application processors is down to 24%. On the other hand, most high-end and mid-range Android phones and tablets still use Qualcomm’s Snapdragon processors.

Mediatek (MDTKF), is the No. Mediatek (MDTKF), the No. 1 company, now sells Dimensity CPUs. These processors are typically used in sub-$300 smartphones and tablets. Microsoft’s (MSFT) new $700 dual-screen smartphone uses a 5G-enabled Snapdragon 855 System-on-Chip.

Qualcomm’s refusal to challenge Mediatek’s dominance in entry-level smartphone processors is why QCOM has a net income margin of 28.3%. Mediatek’s net income margin is 19.1%.

A higher profitability ratio is better than a larger market share. In 2023, smartphone app processors will be worth $38.2-billion.

Qualcomm’s foundry partners are TSMC (TSM) and Samsung (KS:). There’s no need to worry that Qualcomm might suffer a supply shortage of Snapdragon processors.

Windows 11 Chromebook Tailwinds

The commercial launch of Windows 11 on October 5 is a solid tailwind for Qualcomm’s Snapdragon 7C processors for laptops and desktop computers. A 8-core Snapdragon 7C Gen 2 processing power the HP (NYSE) 14 Windows 11 laptop.

Qualcomm now sells TPM 2.0 compliant processors to the $161.9 billion personal computer market. Chromebooks can also run on the Snapdragon 7C CPU. Chrome OS laptop sales are increasing at 35% CAGR.

It is expected that 40 million Chromebooks would be sold in the coming year. Many of those would be powered by Qualcomm’s Snapdragon 7C.

Affordable Valuation Ratios

QCOM is now more affordable due to its 3.1% decline in three months. The forward P/E of QCOM is just 13.3x and the TTM Price/Sales are 4.3x. These ratios are much lower than Nvidia’s (NVDA) 44.2x and 23.5x.

Piotroski F score for QCOM 7 is a sign that QCOM has strong financial health and excellent investment potential.

Wall Street’s Take

Wall Street analysts agree that TSM stock is a strong buy. This is based on 10 Buys as well as three Holds. Qualcomm’s average price target of $176.54 indicates a 43.6% upside possibility.

Conclusion

Qualcomm is an excellent growth stock. The processors and 5G chipsets of Qualcomm are currently being sold to smartphones and PC makers.

Disclosure: Motek Moyen had no position at the time this article was published.

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