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Why Shares of Qualcomm Soared Nearly 8% Higher Today

By Nicholas Rossolillo – Nov 16, 2021 at 5:27PM

Key Points

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Shareholders were pleased with Qualcomm's new investor presentation.

What happened

Shares of mobile chip leader Qualcomm (QCOM -1.88%) 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 (AAPL 3.71%) 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.

A city skyline. An illustrated bubble with "5G" written in it hovers in the sky, representing mobile 5G networks.

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.

Nicholas Rossolillo and his clients own shares of Apple. The Motley Fool owns shares of and recommends Apple and Qualcomm. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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