Qualcomm NASDAQ:QCOM is one of the leaders in the semiconductor space whose stock may be poised to take off in 2025. Stocks had an incredible year in 2024, up 57% through mid-June. However, by early August the stock had fallen sharply, losing more than 30% of its value from its peak. Disastrous events surfaced, destroying the optimism that many had.
QUALCOMM today
As of 01/17/2025 16:00 Eastern
- 52 week range
- $139.26
▼
$230.63
- Dividend yield
- 2.07%
- P/E ratio
- 18.30
- Target price
- $206.57
Shares recovered slightly from September to October, but ended the year below their August low. Now that the company has addressed the key issues and/or mitigated their impact. Stocks could be heading into a new bull cycle. To some extent, this has already begun to be realized. As of midday ET trading on January 17, Qualcomm shares were up more than 7% year over year. Additionally, Wall Street sees strong upside potential for the stock, according to new analyst ratings tracked by MarketBeat. Average of two target prices published in January from Barclays and Mizuho suggests Growth potential 21%.
Below I’ll detail the events that plagued Qualcomm in the second half of 2024 and show how they unfolded. I will also describe new developments around the firm that could become drivers of growth in the new year.
Qualcomm’s problem with Apple and efforts to solve it
One of the problems with Qualcomm over the years has been its relationship with key customer Apple. NASDAQ: APP. For a long time, Qualcomm supplied the 5G modems that Apple installs in its wildly popular iPhone devices. These modems are essentially chips that allow Apple devices to connect to 5G networks. Apple has been building its own 5G modem for at least “half a century,” according to Bloomberg tech analyst Mark Gurman.
In 2023, Qualcomm extended its iPhone supply contract until 2027. But in mid-2024, rumors began to spread that Apple would start using its own modems sooner. These rumors turned out to be true, as the company will be installing a custom modem in its budget iPhone SE in 2025. By 2027, Apple expects to completely phase out Qualcomm modems.
QUALCOMM MarketRank™ Stock Analysis
- Overall MarketRank™
- 100th percentile
- Analyst rating
- Moderate purchase
- Pros/cons
- Growth potential 25.5%
- Short interest level
- Healthy
- Dividend Power
- Strong
- Environmental assessment
- -0.89
- Mood News
- 1.09
- Insider trading
- Sale of shares
- Project Profit Growth
- 15.51%
See full analysis
However, Qualcomm has long recognized that this is inevitable. Thanks to this, the company has significantly diversified its business. The company’s automotive and Internet of Things (IoT) businesses now exceed the size of its business with Apple. Last year, the company’s revenue was about $2.6 billion, while Apple’s revenue was around $2 billion.
Additionally, Qualcomm expects the automotive and IoT businesses to grow much faster. For the first quarter of 2025, the company expects a “mid-single digit” increase in mobile phone revenue compared to the year-ago quarter. However, the company expects IoT revenue to grow more than 20% and automotive revenue to increase 50%. Over the next few years, the company expects cumulative growth in these segments to exceed 20% annually.
ARM wins argument: AI computers can drive growth
Another problem looming over the firm was the lawsuit with ARM. NASDAQ:ARM. In December, a jury found that Qualcomm’s AI-PC chips were properly licensed by Arm. This gives the company the opportunity to continue selling components and growing its PC business, which is central to its IoT growth strategy. Arm says it will continue to litigate, but this remains a victory for Qualcomm.
However, Qualcomm’s AI PC has other issues and news related to them. In 2024, reports indicated that many applications were not compatible with the chips. This includes popular games like Fortnite and League of Legends. In general, industry analysts note that other laptops have superior gaming performance. However, Qualcomm also recently announced that its latest chips will be used in $600 AI-enabled laptops. This lower price could boost PC sales. The company aims to generate billions in revenue from this market over the next few years.
Additionally, for many customers, the poor gaming performance of a Qualcomm laptop may not matter. Data for 2023 shows that gamers are massively choosing to play on desktops over laptops. Only 13% of gamers are likely to play on a laptop. This suggests that Qualcomm’s problems with gaming on laptops won’t put off many customers.
Is Qualcomm preparing for a big year in 2025?
Overall, if several issues are largely behind us or mitigated, Qualcomm stock could be poised to take off in 2025. Problems with its laptops may be exaggerated, meaning they may exceed expectations. The company’s growth drivers in automotive and IoT are promising. They soften the blow of curtailing relations with Apple. The company also has the nice added bonus of being a stock that offers a solid 2% dividend yield.
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