Is Now the Right Time to Revisit Qualcomm After Latest 11% Surge?

• Curious if QUALCOMM stock is still a buy at today's prices? You are not alone, and digging into its value could reveal surprises that might change your view.
• QUALCOMM's share price has had a bumpy ride recently, with a 5.5% dip over the last week. It has surged 11.3% in the last month and is up 11.2% year-to-date.
• Recent news highlights the company's ongoing innovation in 5G and AI chip technology, attracting both investor interest and some speculation. Announcements about strategic partnerships and tech advances have certainly fueled the latest moves in the stock price.
• According to our valuation checks, QUALCOMM scores a 4 out of 6 for being undervalued. This gives us plenty to talk about regarding its current price. Let us break down the main valuation methods next, and stay tuned for an even smarter way to analyze QUALCOMM's worth at the end of the article.

Find out why QUALCOMM's 2.2% return over the last year is lagging behind its peers.

Approach 1: QUALCOMM Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates the value of a company by projecting its expected future cash flows and then discounting those cash flows back to the present using a required rate of return. This method provides investors with an intrinsic value based on the business’s ability to generate cash over time.

QUALCOMM’s most recent twelve months produced Free Cash Flow of $12.65 Billion. Analysts forecast that QUALCOMM's Free Cash Flow will climb steadily, projecting $13.3 Billion by 2026 and reaching $17.4 Billion by 2029. After the analyst outlook period, additional growth is extrapolated by Simply Wall St, with FCF estimated to rise beyond $24 Billion over a ten-year horizon.

Applying the DCF model, QUALCOMM’s fair value is estimated at $207.12 per share. This is 17.5 percent above recent trading levels, suggesting the stock is currently undervalued by the market.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests QUALCOMM is undervalued by 17.5%. Track this in your watchlist or portfolio, or discover 877 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for QUALCOMM.

Approach 2: QUALCOMM Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most commonly used valuation tools for profitable companies like QUALCOMM. It helps investors gauge how much they are paying for every dollar of earnings the company generates and is especially useful for businesses with stable and growing profits.

Growth expectations and risk profiles play a big role in determining what a “normal” or “fair” PE ratio should be. Companies expected to grow earnings faster or with more predictable cash flows tend to trade at higher PE multiples, while those facing higher risk or uncertainty will usually attract lower multiples.

QUALCOMM currently trades at a PE ratio of 33.0x. That is a bit below the average of its closest peers, which is 78.1x, and also slightly under the broader semiconductor industry average of 35.4x. These comparisons offer a broad context, but they do not account for QUALCOMM’s unique growth prospects and risk profile.

To provide a more tailored benchmark, Simply Wall St calculates a proprietary “Fair Ratio” for QUALCOMM, which is 40.8x. The Fair Ratio stands out because it adjusts for company-specific factors like earnings growth, profit margins, risks, industry characteristics, and market capitalization, making it a more rounded gauge than simply benchmarking against peers or the broader industry.

Comparing QUALCOMM’s actual PE (33.0x) to its Fair Ratio (40.8x) reveals that the stock trades at a meaningful discount to what would be expected when fully considering its outlook and risks. This suggests the shares are currently undervalued.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1404 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your QUALCOMM Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personal investment story, where you link your own view of QUALCOMM's growth, profitability, and industry position to your financial forecasts and a fair value for the shares.

Narratives bridge the gap between the numbers and the bigger picture, letting you capture both the facts and your expectations in one easy-to-use tool, available right on the Simply Wall St Community page, where millions of investors share their views.

With Narratives, you can easily compare your Fair Value to the current share price, helping you decide if it's time to buy, hold, or sell, all while factoring in dynamic updates when fresh news or earnings reports are released.

For example, some investors see QUALCOMM’s future as bright, with estimates as high as $300 per share, while others are more cautious, suggesting a value closer to $140. Your Narrative is your own, and this flexible, story-driven approach makes reaching your own conclusion clearer than ever.

Do you think there's more to the story for QUALCOMM? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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