Yes, Qualcomm is Lord and Conqueror of All That is Mobile -- But is its Stock Over-Priced?

If you love smartphones and tablet devices like the increasingly ubiquitous iPads, you’ve got to love Qualcomm (QCOM). Or so, at least, investors appear to have concluded.

QCOM Revenue Quarterly Chart

QCOM Revenue Quarterly data by YCharts

True, the growth in revenues at Qualcomm – which makes chips that go into smartphones like Samsung’s popular Galaxy models – hasn’t kept pace with that of Apple (AAPL), whose iPhones and iPads helped create the market for such “smart” devices. But it’s moving in the same direction. The biggest question now is whether that growth is priced in; Qualcomm trades at a premium to Apple at this point in time -- based on PE ratio -- and that has been the case for much of the last five years. The gap, however, has narrowed considerably over the last three years.

AAPL PE Ratio TTM Chart

AAPL PE Ratio TTM data by YCharts

Is Qualcomm overvalued? So far there are few signs that consumers are halting their quest for the newest, speediest gadgets powered by the company’s chips; Apple’s iPhones are backordered. The stock isn’t cheap, of course; up 55% over the last five years.

QCOM Chart

QCOM data by YCharts

The company has a track record of increasing its dividend payments, however, and although its dividend yield is below its high, at 1.6%, with its cash holdings edging higher once more, there is every reason to suppose it will continue that pattern of paying higher dividends.

QCOM Dividend Chart

QCOM Dividend data by YCharts

Qualcomm, one of the new technology market darlings, may not be a stock you’ll want to chase higher at these levels, but it’s hardly unattractive. Regardless of who wins the smartphone wars, or what new technological innovations arrive on the scene, chips will be needed to make them work, and for now, Qualcomm appears to be making the chips of choice for high-end devices. Intel (INTC) is badly lagging.

Suzanne McGee is a contributing editor at YCharts, which includes the just-released YCharts Pro Platinum for professional investors.

Read more articles about: Company Analysis  

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