Qualcomm (QCOM): A Buying Opportunity in a Lagging Market

Qualcomm's (QCOM) stock has drifted sideways in 2025, rising just 3% year-to-date, even as its fundamentals signal robust growth. The disconnect between its operational strength and market performance presents a compelling entry point for investors. Let's unpack why this semiconductor giant is underappreciated—and why now might be the time to act.

The Underperformance Puzzle
Despite outpacing the S&P 500's revenue growth over three years and delivering strong Q2 FY25 results—15% revenue growth to $10.84 billion and EPS of $2.85—QCOM's stock lags behind broader indices. . While the S&P 500 edged up 9% and the Nasdaq dipped -1.5%, Qualcomm's muted gains highlight a market that's yet to reward its fundamentals.

Fundamentals Defy the Doldrums
The data tells a story of resilience. Qualcomm's debt-to-equity ratio (8.5%) is far stronger than the S&P 500 average (19.9%), and its operating margins (26.4%) nearly double the broader market's 13.2%. Recent Zacks upgrades further validate its momentum. In June 2025, Qualcomm's Zacks Rank jumped to #2 (Buy) from #3 (Hold), driven by upward revisions in EPS estimates. Analysts now project 15.3% annual EPS growth to $11.78 for FY2025, with Q3 estimates at $2.68—15% higher than last year. .

Valuation: A Discounted Leader
Qualcomm's valuation metrics scream opportunity. Its Forward P/E of 13.13 is half the sector average (25.57), and its PEG ratio of 1.6 aligns with industry norms despite faster growth. This discount is puzzling given its 11.8% revenue growth trajectory and dominant position in 5G, AI, and automotive semiconductors. The Zacks Rank #2 (Buy) also implies it ranks in the top 20% of stocks by earnings momentum—a signal often preceding price appreciation.

Why the Lag? And Why Buy Now?
Market skepticism persists over macro risks: U.S.-China trade tensions, semiconductor tariffs, and cyclical demand softness in smartphones. Yet Qualcomm's diversified portfolio—spanning IoT, automotive, and enterprise—buffers it against sector-specific headwinds. The recent Zacks upgrade and consistent EPS beats (four straight quarters) suggest the worst is behind it.

Investors should view dips as buying opportunities. With a Zacks Value Score of B (indicating undervaluation) and a dividend yield of 1.2%, QCOM offers both growth and income potential. The stock's 20%+ upside to its 12-month price target of $200 (vs. current $165) is supported by its P/E expansion potential as the market catches up to its earnings power.

The Bottom Line
Qualcomm's underperformance is a function of macro fears, not fundamentals. With a robust Zacks Rank upgrade, a compelling valuation, and tailwinds from 5G and AI adoption, the stock is primed to rebound. Investors seeking a leveraged play on semiconductor growth—and a stock undervalued by the market—should consider adding QCOM to their portfolios. The patience to buy during this correction could pay dividends as the market finally rewards Qualcomm's strengths.