On Friday, JPMorgan updated its outlook on Qualcomm (NASDAQ:QCOM), increasing its price target to $235 from the previous target of $185, while reaffirming its Overweight rating on the stock. The firm highlighted several factors that could drive sustained double-digit revenue growth for Qualcomm into fiscal year 2025 (FY25) and beyond.
The firm's positive stance is based on the anticipated ramp-up in artificial intelligence (AI) smartphones and PCs, which is expected to lead to significant content increases. Additionally, the robust growth in the automotive sector is seen as a key driver. These elements are considered secular drivers of growth, which could be further augmented by a potential cyclical recovery in the smartphone and PC markets.
According to JPMorgan's extended model, which now reaches out to fiscal year 2027 (FY27), Qualcomm is projected to achieve consistent double-digit revenue growth, excluding its business with Apple (NASDAQ:AAPL).
The forecast includes low double-digit revenue growth in handsets (excluding Apple), approximately 30% compound annual growth rate (CAGR) in automotive, and over 26% CAGR in the Internet of Things (IoT) sector. The projections are bolstered by an expected increase in PC-related revenue, which is estimated to grow to $3.7 billion in FY27E from $300 million in FY24E.
JPMorgan anticipates that these drivers will provide clear visibility into the company’s revenue and earnings growth (excluding Apple), which could lead to a re-rating of Qualcomm shares. The firm suggests that the historical trading average of around 15 times could potentially increase to approximately 20 times.
Applying this 20 times multiple to the company's earnings power, which JPMorgan estimates to be $13, supports the new December 2025 price target of $235.
InvestingPro Insights
Qualcomm's position as a key player in the Semiconductors & Semiconductor Equipment industry is further supported by its financial robustness and market performance. With a market capitalization of $195.74 billion and a Price/Earnings (P/E) ratio standing at 23.57, Qualcomm demonstrates a strong market presence. The company's P/E ratio, when adjusted for the last twelve months as of Q2 2024, shows a slightly more attractive figure at 22.27, indicating potential for investment value.
InvestingPro Tips highlight Qualcomm's consistent commitment to shareholder returns, having raised its dividend for 21 consecutive years. Additionally, the company's liquid assets surpass its short-term obligations, suggesting financial stability. This is consistent with JPMorgan's upbeat outlook and supports the idea of sustained revenue growth for Qualcomm. For investors seeking more comprehensive analysis, there are 6 additional InvestingPro Tips available, which can offer deeper insights into Qualcomm's financial health and market potential. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription for detailed metrics and investment strategies.
Moreover, Qualcomm's Price/Book ratio for the same period is at 8.0, which, while on the higher side, may reflect the company's strong brand and technological assets. The company's profitability is not just a prediction; it has been profitable over the last twelve months, aligning with JPMorgan's positive outlook. With a dividend yield of 1.94% and a dividend growth of 6.25%, Qualcomm continues to be an attractive option for income-seeking investors.
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