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Qualcomm (QCOM) Shares Rise on Ambitious Growth Targets

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Qualcomm Incorporated QCOM took the investor community by surprise when it revealed some ambitious growth targets through fiscal 2024. The company expects to witness a stellar rise in its addressable market opportunities from $100 billion at present to more than $700 billion in the next decade, as it continues to diversify its revenue stream to cater to various customer segments across several industries. The bullish outlook appeared to strike the right chords with investors as share prices were up 7.9% to close at $181.81 as of Nov 16, 2021.

Leveraging the technology roadmap for a focused approach to innovation, Qualcomm aims to connect millions of devices to the ‘connected intelligent edge’. The company intends to harness artificial intelligence to meet increased demands for essential products and services that are the building blocks for digital transformation in the cloud economy. Qualcomm envisions solid growth opportunities within the mobile space, driven by its Snapdragon portfolio, which has reportedly set high standards for premium-tier Android handsets.

Qualcomm is one of the largest manufacturers of wireless chipset based on baseband technology. The company is focusing to retain its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches. It is likely to help users experience a seamless transition to superfast 5G networks, delivering low-power resilient multi-gigabit connectivity with unprecedented range and Qualcomm's best-in-class security. This, in turn, would further offer the flexibility and scalability needed for broad and fast 5G adoption through accelerated commercialization by OEMs. Qualcomm is reportedly the only chipset vendor with 5G system level solutions spanning both sub-6 and millimeter wave bands and one of the largest RF (radio frequency) front end suppliers with design wins across all premium-tier smartphone customers.

The company is witnessing healthy traction in EDGE networking that helps to transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables, and tablets. The automotive telematics and connectivity platforms, digital cockpit, and C-V2X solutions are also fueling emerging automotive industry trends such as growth of connected vehicles, the transformation of the in-car experience and vehicle electrification. Qualcomm believes that it is on track to become the largest smartphone RF front-end supplier by revenues in the near future.

Management expects fiscal 2024 revenues to reach $46 billion with contribution from IoT devices likely in the range of $9 billion. Revenues from QCT segment are expected to record a CAGR of mid-teens by fiscal 2024 with an operating margin of more than 30%. Automotive revenues are expected to grow to $3.5 billion in five years and $8 billion in 10 years.

The bullish projections come close on the heels of solid fourth-quarter fiscal 2021 results with record non-GAAP earnings and revenues. Quarterly non-GAAP net income came in at $2,916 million or $2.55 per share compared with $1,669 million or $1.45 per share in the year-ago quarter. Undeterred by the supply chain adversities, the non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 29 cents. Non-GAAP revenues in the reported quarter were $9,321 million compared with $6,502 million in the year-earlier quarter. The figure beat the consensus mark of $8,877 million, driven by 5G strength, high-performing core chipsets, and new RF front-end content.

The stock has gained 23.6% over the past year compared with the industry’s growth of 18.5%. We remain impressed with the inherent growth potential of this Zacks Rank #2 (Buy) stock.

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Another top-ranked stock in the industry is Clearfield, Inc. CLFD, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Clearfield delivered an earnings surprise of 49%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 19.4% in the past 60 days. Over the past year, Clearfield has gained a stellar 194.3%.

Sierra Wireless, Inc. SWIR, carrying a Zacks Rank #2, is another solid pick for investors. It has a long-term earnings growth expectation of 12.5% and delivered an earnings surprise of 34.2%, on average, in the trailing four quarters.

Over the past year, Sierra Wireless has gained a solid 76.6%. The company continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.

Arista Networks, Inc. ANET carries a Zacks Rank #2. It has a long-term earnings growth expectation of 16.7% and delivered an earnings surprise of 6%, on average, in the trailing four quarters.

Arista is likely to benefit from strong momentum and diversification across its top verticals and product lines. It has expanded its cognitive campus edge portfolio with a new Wi-Fi 6E access point and has introduced an enterprise-grade Software-as-a-Service offering for its flagship CloudVision platform.

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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report

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