Qualcomm (QCOM): A Fundamental and Technical AnalysisIn this post, I’ll be providing my own analysis on Qualcomm (QCOM), shedding light on the fundamental and technical aspect of the stock.
What is Qualcomm?
Qualcomm (QCOM) is short for ‘Quality Communications’.
The American company was established by a communications engineer, Irwin Jacobs.
It’s a company that focuses on semiconductors, software, and wireless technology services.
Business Model
- Qualcomm is divided into two main businesses: QCT, and QTL
QCT
- QCT (Qualcomm CDMA Technologies) develops and supplies integrated circuits and system software
- Specifically, it develops and supplies systems and software used in mobile devices, wireless internet, communications devices, internet of things, and semiconductors used for vehicle infotainments.
- The smartphone AP is a core device that controls the OS, CPU, memory, audio, and the camera
- Qualcomm currently covers 50% of the market share for mobile device APs, and dominates 88% of the 5g Smartphone AP market.
- They are way ahead of their counterparts in both market share and technology.
- Qualcomm also offers a cloud service for vehicles, allowing wireless updates to take place
- They have also developed an autonomous driving solution chip called Snapdragon Driving.
- We will see cars that use this chip in 2023
- The RF Solution, a wireless network that allows signals to be identified without confusion, is also increasing in demand
- QCT covers 75% of the company’s revenue.
QTL
- QTL (Qualcomm Technology Licensing) grants licenses and rights to use intellectual property to others.
- Qualcomm possesses patents on CDMA, LTE, 5g, video and audio codec, WIFI, GPS, NFC and Bluetooth.
- QTL covers 23% of the company’s revenue
Financials
- Despite the numbers not being anything extraordinary, Qualcomm has reported a consistent increase in yoy revenue
- Especially in the case of Q3 2020, we have seen revenue and earnings skyrocket.
- The firm’s Q1 earnings was $468m, $845m in Q2, and $2.96b in Q3
- Along with this, their EPS has also skyrocketed, and analysts estimate a an EPS of $2.07 for Q4
- Qualcomm has not been profitable for the past few years due to their heavy investment in research and development
- While a lot was invested in R&D, the commercialization of proprietary 5g technology could bring immense profits to the company in the near future
Technical Analysis
- The daily chart shows a clear uptrend, with prices creating higher lows and higher highs
- Prices are trading within an ascending parallel channel, having been rejected by the top trend line resistance
- There are two major gap supports at $100, and $140
- The Moving Average Convergence Divergence (MACD) demonstrates diminishing bullish momentum, with decreasing histograms
- Nevertheless, as prices trade above the Ichimoku cloud and the 60 Simple Moving Average (SMA), the overall trend is very bullish
Summary
In conclusion, Qualcomm is a company that has a proven, solid business model. Their heavy investment in research and development is finally seeing light as the company turns increasingly profitable. Technical analysis also demonstrates immense bullish momentum behind the stock’s price.
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