Anyone who’s been stuck in a traffic jam for any length of time appreciates the value of the autonomous vehicle. Communications company leader Qualcomm (QCOM) is part of the drive to get us there.
That drive just got a little easier thanks to a new acquisition the company’s making. Between its current line of smartphone-heavy business, and its new potential push into driverless cars, the end result is reason to be bullish on Qualcomm.
The last year for Qualcomm has featured a major upward thrust followed by a slow decline to more “normal” levels. From April 2021 to nearly November, the company held to a fairly tight range between $120 and $150 per share. November saw a substantial upward spike that proved unsustainable, and now the company is back around the $140 range once more.
The latest news might get Qualcomm back up past those spike levels. The company concluded its efforts to acquire Arriver, the self-driving vehicle arm of Veoneer. With Arriver in its fold, Qualcomm will be better able to compete against Intel’s (INTC) Mobileye, currently regarded as a leader in the industry.
Wall Street’s Take
Turning to Wall Street, Qualcomm has a Moderate Buy consensus rating. That’s based on 12 Buys and five Holds assigned in the past three months. The average Qualcomm price target of $216.88 implies 55.7% upside potential.
Analyst price targets range from a low of $185 per share to a high of $250 per share.
Hedge Funds Losing Faith, but Dividends Inspire Hope
Right now, hedge funds are significantly less interested in Qualcomm than they once were. The word from the TipRanks 13-F Tracker shows that, once more, hedge funds have reduced their stake in Qualcomm by about two million shares last quarter.
This is a return to form for hedge fund appraisal of Qualcomm; hedge funds had sold shares in Qualcomm from March 2020 straight on to June 2021. The first increase in hedge fund stakes took place in September 2021, but December 2021’s departure saw a further reduction in stake.
However, for income investors, Qualcomm offers a welcome dividend. Qualcomm’s dividend history shows just what dividend stock investors like to see: a dividend that regularly increases, and has been doing so over the last four years.
Even during 2020 and the worst of the COVID-19 restrictions, Qualcomm maintained, and even raised, its dividend.
Qualcomm Needs Help
Granted, the autonomous vehicle market has been rough for its entrants in the last few years. Even Elon Musk noted that actually getting an autonomous vehicle to market was a “hard problem.”
Given the sheer range and extent of the problems Tesla (TSLA) has seen in that vein, it’s not surprising that actually getting such a car out is proving a taller order than most expect.
Worse yet for Qualcomm, there are signs that smartphones aren’t quite as ubiquitous as they once were. The “dumbphone” is making something of a comeback. “Dumbphones” are basically the cell phones that most had back in the 2000 to around 2010 range.
Dumbphone sales were on track to hit one billion units in 2021, up from just 400 million in 2019. With smartphone sales on the decline, that could mean some trouble for Qualcomm sales going forward.
With that in mind, it’s little surprise that Qualcomm would work to branch out. While the smartphone trade is unlikely to go away, potential weakness therein might prove a limiting factor. If Qualcomm can make good on self-driving cars, having a piece of that market would likely easily make up for smartphone losses.
While Qualcomm will likely have the same level of problem that Musk and Tesla had with self-driving vehicles, Qualcomm is advancing in this field. Qualcomm already had Snapdragon Ride, and Arriver was using Snapdragon Ride chips in its operations for the last several years.
By way of comparison, Nvidia (NVDA) has around $11 billion worth of sales pipeline operations for its DRIVE autonomous vehicle platform. Since Nvidia focuses mainly on premium cars, that leaves a whole range of budget models open for the Qualcomm platform.
Concluding Views
Qualcomm is branching out, and that’s good news for investors. While the exact value of the self-driving car market may be limited until the potential sales pipelines become actual sales numbers, having a stake in a market that most will likely eagerly get in on is worth doing.
Better yet, the numbers look great for Qualcomm as well. With Qualcomm trading significantly under its lowest price targets, there’s plenty of upside potential.
So Qualcomm has a solid position in a currently solid market — smartphones — but also a potentially sound position in a market that will be solid in the future in self-driving cars. That combination makes for a stock worth being bullish about.
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