Qualcomm (NASDAQ:QCOM) is a very compelling semiconductor holding investors should watch. The Snapdragon chip refresh virtually assures market share growth on the 5G refresh.
Qualcomm unveiled a new Snapdragon 865 and 765, with the latter a budget chip that will bring 5G to everyone. Apple (NASDAQ:AAPL) may not build any hype around an iPhone 5G when Qualcomm is already supplying inexpensive chips for the Android market. The SoC (System on a chip) will offer 5G connectivity, advanced AI processing, and select gaming support.
The 865 is a premium chip that will show up during CES and MWC. And since 2020 will usher a new wave of 5G devices and services, Qualcomm will benefit greatly from the device refresh. Notably, designing the chip without an integrated modem is practical. Qualcomm avoids adding complexity to the 5G platform. In effect, it shifts the design complexity to the phone manufacturers. This could increase design time and slow production.
Fortunately, the X55 modem had a lead time to market, so OEM vendors have time to work on the design.
Valuation
QCOM stock trades at a forward P/E of below 14 times. This is too low, given the EPS growth next year is over 45%. Investors looking for an inexpensive chip company should consider Qualcomm at these levels.
