Despite trading near yearly highs, Qualcomm (NASDAQ: QCOM) still has plenty of deep value. Investors are not worried over the chip giant’s future, despite its failure to close the NXP Semiconductor (NASDAQ: NXPI) buyout. And concerns over its case against Apple (NASDAQ: AAPL) is already priced in the stock. Valuations also suggest more upside for QCOM stock.
Qualcomm trades at a forward P/E of just 15 times. In a modified Dutch auction that expired last week on August 27, the company will accept payment of $5.1 billion for $76.21 million shares. This purchase is below the $10 billion offered. Investors think QCOM stock is worth more than $67.50. The holders are also enjoying a dividend yielding ~3.6%. While waiting for a resolution to the Apple conflict, a favorable ruling against Apple, as early as next year, would send the stock price higher.
Risks
High-end smartphone sales peaked already, a market that Qualcomm depends on for growth. Although last quarter’s results did not show any weakness, a deceleration in orders would shake QCOM stock lower. Skyworks (NASDAQ: SWKS) is on a downtrend and Cypress Semi (NASDAQ: CY) is range-bound. Both also trade at inexpensive levels, signaling the market’s caution for mobile smartphone suppliers.
