QUALCOMM Incorporated (QCOM): An Undervalued Wide Moat Stock to Buy According to Analysts

Qualcomm Incorporated (QCOM) has long been a favorite among analysts and investors alike, with its strong market position, extensive intellectual property portfolio, and continuous investment in research and development. As the company diversifies its revenue streams beyond handsets, focusing on AI, automotive, and IoT, analysts remain bullish on its prospects. This article explores why QCOM is an undervalued wide moat stock to buy, according to analysts.



Wide Moat Advantages

Qualcomm's wide moat is driven by several factors that contribute to its competitive advantage and sustainability in the long term. These factors include:

1. Intellectual Property Portfolio: Qualcomm holds a vast portfolio of patents, which is a significant barrier to entry for competitors. As of 2024, the company has over 130,000 patents and patent applications worldwide. This extensive IP portfolio allows Qualcomm to license its technology to other companies, generating substantial royalty income.
2. Market Position: Qualcomm is the leading provider of wireless chipsets, with a significant market share in the mobile device market. In 2024, QCOM's revenue from its Qualcomm CDMA Technologies (QCT) segment was $28.5 billion, accounting for 73% of the company's total revenue. This dominant market position enables Qualcomm to maintain pricing power and negotiate favorable terms with customers.
3. Investment in Research and Development: Qualcomm consistently invests a significant portion of its revenue in research and development to maintain its technological edge. In 2024, QCOM spent $5.2 billion on R&D, representing 13% of its total revenue. This investment allows Qualcomm to stay ahead of the competition by developing new technologies and improving existing ones.



Diversification into Non-Handset Revenue Streams

Qualcomm is rapidly diversifying beyond handsets, targeting $22 billion in non-handset revenue by 2029. This diversification is driven by AI, automotive, and IoT segments. By expanding into these areas, QCOM reduces its reliance on a single customer, such as Apple, and mitigates the risk of revenue loss from any one segment. This diversification strategy is expected to drive the company's revenue and earnings, ultimately leading to an increase in its valuation.

Moreover, Qualcomm's strong non-Apple relationships and market leadership in these new segments are expected to help the company overcome any potential revenue loss from Apple's shift to in-house modems. This diversification is likely to enhance QCOM's competitive edge and contribute to its long-term growth prospects.

Analysts' Bullish Outlook

According to 28 analysts, the average rating for QCOM stock is "Buy." The 12-month stock price forecast is $203.96, which is an increase of 29.77% from the latest price. This positive outlook reflects the market's confidence in Qualcomm's growth prospects and its ability to successfully diversify its revenue streams.

Furthermore, Qualcomm's P/E ratio of 17.81 is relatively low compared to other tech giants, signaling potential undervaluation. This suggests that the market may not yet fully appreciate the company's growth potential and diversification efforts, presenting an opportunity for investors.

In conclusion, Qualcomm's wide moat advantages, driven by its strong intellectual property portfolio, market position, and investment in research and development, make it an attractive investment opportunity. The company's diversification into non-handset revenue streams, such as AI, automotive, and IoT, further enhances its competitive edge and growth prospects. With analysts maintaining a bullish outlook on QCOM, the stock appears to be an undervalued wide moat stock to buy.

Important note: Investors are reminded to do their own due diligence and not rely on the information provided as financial advice. The rating is also not intended to time a specific entry/exit at the point of writing unless otherwise specified.