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Last week was a turbulent one for semiconductor stocks, as investors considered a mixed bag of quarterly results from key industry players ASML (ASML) and Taiwan Semiconductor (TSM). While ASML spiraled sharply lower after its disappointing quarterly results were released a day early, Taiwan Semi surged to a trillion-dollar valuation as artificial intelligence (AI) demand boosted its Q3 earnings.
Chips will continue to be in focus this week, with the latest earnings due out from the likes of Texas Instruments (TXN) and Lam Research (LRCX) in the days ahead. For investors looking to add exposure to this in-demand industry, here's a look at one top stock with a long history of earnings growth that's a solid pick for passive income.
About Qualcomm Stock
Valued at $190.7 billion, San Diego-based Qualcomm Inc. (QCOM) is a fabless semiconductor company involved in the design and development of high-performance, low-power chips for the wireless telecommunications industry, PCs, automotives, robotics, wearables, and AI use cases. Qualcomm also licenses a substantial portfolio of IP through its QTL segment.
QCOM stock is up more than 16% on a year-to-date basis, and has gained 55.5% over the past 52 weeks.
Qualcomm has a long history of paying dividends, and has consistently increased its quarterly payout in each of the last 20 years. Shareholders currently receive a dividend of $0.85 per share on a quarterly basis, which translates to a yield of 1.99% at current levels - more generous than the tech sector median.
During the fiscal third quarter of 2024, QCOM returned $2.3 billion to shareholders, comprised of $949 million in cash dividends and $1.3 billion in share repurchases.
Qualcomm Tops Q3 Earnings
Qualcomm reported its fiscal third-quarter results in late July, where it posted a profit of $2.13 billion, or $2.33 per share, up 24.6% year over year. That surpassed analysts' estimate of $2.25 per share. Revenue for the quarter totaled $9.39 billion, up 11% from the same quarter last year, and again surpassing the consensus estimate of $9.23 billion.
During the quarter, the chipmaker reported adjusted operating income of $3.02 billion, and a gross margin of 55.6%, in line with last year. Qualcomm ended the quarter with a cash reserve of $7.77 billion and a free cash flow of $2.67 billion.
“We are on track to deliver approximately 50% year-over-year revenue growth in fiscal '24, providing confidence in our ability to execute to our long-term targets,” said CFO and COO Akash Palkhiwala on the Q3 conference call.
For the fiscal fourth quarter, management guided for revenues of $9.5 billion to $10.3 billion, and non-GAAP EPS of $2.45 to $2.65. Qualcomm is set to report its Q4 results on Nov. 6.
What Do Analysts Predict for Qualcomm?
Notably, Qualcomm has been named as a potential buyer for Intel (INTC), but Bloomberg reports that any bid might be delayed until after November's presidential election, given the current temperature around the tech sector and antitrust investigations.
Analysts are reasonably bullish on QCOM stock, which has a consensus “Moderate Buy” rating and a mean price target of $213.83. That implies expected upside potential of 26.5% from current prices.
Valued at 16.90 times forward adjusted earnings and 14.39 times forward cash flow, QCOM trades at a discount to the broader tech sector, as well as its own historical valuations. This indicates that now could be a good time to scoop up shares of this reliable semiconductor dividend stock at a reasonable price.
