Old and boring wireless communications chip technologist Qualcomm (QCOM 0.18%) sported a stellar total return (share price plus dividends reinvested) of 32% in 2023. It was an impressive showing, especially considering that the smartphone market (still the bulk of Qualcomm's revenue) was in a deep slump last year.

But with the smartphone market bottoming out and 5G network expansion still ongoing, I'm optimistic Qualcomm stock can do well again in 2024. Here's why I added to my position to kick off the new year.

Is 5G growth really over?

During the first wave of 5G network launches in the last few years, a slew of new 5G-enabled smartphone models came with it. In fact, some research estimates say that nearly 70% of smartphone shipments in 2023 are already 5G-ready. This big wave, and the resulting drop in consumer electronics purchasing after the pandemic, shows up in Qualcomm's epic revenue and earnings per share (EPS) boom and bust over the last three years.

QCOM Revenue (TTM) Chart

Data by YCharts.

5G growth isn't finished, though. The newest generation of wireless communications networks is about more than just phones. 5G network improvements are still needed, which means the sale of more chips both in network infrastructure and smartphones. Additionally, all sorts of devices are envisioned as being 5G-capable -- from PCs (some mobile providers, like Verizon Communications, are offering 5G as a new type of home internet service) to automobiles to smart factories (robotics that utilize a private 5G network to connect and coordinate operations).

All of these developments around 5G bode well for Qualcomm. According to CFO Akash Palkhiwala, a transition to more 5G chips equates to about a 10% increase in semiconductor average selling price (ASP) versus previous-generation mobility chips. Paired with a decrease in smartphone sales that appears to have happened in the third quarter of 2023, Qualcomm could be entering a new phase of growth.

The company's fourth-quarter fiscal 2023 (the three months ended in September 2023) revenue was $8.6 billion. The outlook for the first quarter of fiscal 2024, which ended in December 2023, is for revenue of $9.1 billion to $9.9 billion. That outlook leaves open the possibility for year-over-year growth since Q1 revenue the year prior was $9.46 billion.

In 2024, it's all about profit margins

During the brutal smartphone and consumer electronics downturn, Qualcomm held up quite well. It remained highly profitable by all measures. In fact, Qualcomm's free cash flow has already returned to all-time highs, an effect I explained early last year driven by its elevated inventory of chips starting to get sold and converted into cash.

QCOM Net Income (TTM) Chart

Data by YCharts.

With a business recovery still in the early innings, Qualcomm's profit margins could rebound in grandiose fashion in 2024 if sales even just modestly increase. Along the way, the company has ample cash flow to fund research and development of new products (like its upcoming Snapdragon X Elite attacking the laptop market), service debt, pay its dividend (currently yielding 2.3% a year), and repurchase stock ($2.97 billion's worth last year, or about 2% of the current market cap).

Qualcomm stock trades for about 15 to 16 times Wall Street analysts' consensus estimate for 2024 free cash flow. With an uptick expected in Qualcomm's smartphone and 5G bread and butter, this looks like a reasonable value. This is why I recently added to my position, and I am happy to continue holding Qualcomm as a core semiconductor stock for 2024 and beyond.