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Section 1: Company Overview and Fundamentals
1.1 Company Overview:
Qualcomm Incorporated (NASDAQ: QCOM) is engaged in the development and commercialization of foundational technologies for the wireless industry, including third generation (3G), fourth generation (4G) and fifth generation (5G) wireless connectivity, and high-performance and low-power computing, including on-device artificial intelligence. Its segments include Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL) and Qualcomm Strategic Initiatives.
Kalkine’s Dividend Income Report covers the Company Overview, Key positives & negatives, Investment summary, Key investment metrics, Top 10 shareholding, Business updates and insights into company recent financial results, Key Risks & Outlook, Price performance and technical summary, Target Price, and Recommendation on the stock.
Price Performance:
1.2 The Key Positives, Negatives, and Investment summary
1.3 Top 10 shareholders:
The top 10 shareholders together form ~31.45% of the total shareholding, signifying concentrated shareholding. The Vanguard Group, Inc. and BlackRock Institutional Trust Company, N.A., are the biggest shareholders, holding the maximum stake in the company at ~10.13% and ~5.83%, respectively.
1.4 Dividend payments with impressive dividend yield:
On October 16, 2024, Qualcomm announced a cash dividend of USD 0.85 per share on its common stock, payable on December 19, 2024, to stockholders of record as of December 5, 2024. As of January 21, 2025, Qualcomm's dividend yield stands at 2.03%, reflecting its strong commitment to shareholder returns. Historically, Qualcomm has maintained a consistent dividend policy, with an FY dividend yield of 1.94% and a five-year average yield of 2.14%. The company's payout ratio remains disciplined, with an FY payout ratio of 37.53% compared to its five-year average of 37.49%, ensuring sustainable dividend payments. Qualcomm's coverage ratio further highlights its robust financial health, with an FY ratio of 266.47%, aligning closely with its five-year average of 266.72%. Additionally, the company has demonstrated steady growth in dividends, with a five-year DPS growth of 6.20% and a DPS estimate growth of 1.13%, underlining its focus on enhancing shareholder value. The upcoming interim dividend of USD 0.85 per share, announced on January 17, 2025, is scheduled to have an ex-dividend date of March 6, 2025, and a payment date of March 27, 2025, continuing Qualcomm's strong track record of shareholder-friendly initiatives.
1.5 Key Metrics
Qualcomm's performance from Q2FY24 to Q3FY24 reflects a positive trajectory in key financial metrics, showcasing its robust operational efficiency and profitability. Gross profit margin improved from 55.05% to 56.39%, while EBITDA margin rose from 28.48% to 30.81%, indicating better cost management and higher earnings. The operating margin surged from 23.02% to 26.52%, accompanied by a significant increase in income before tax margin, which leaped from 16.45% to 25.34%, and net margin, which advanced from 18.87% to 28.46%. Furthermore, Qualcomm demonstrated an enhanced return on capital, with return on average common equity climbing from 37.07% to 42.25%, return on average total assets improving from 14.67% to 19.04%, and return on invested capital increasing from 22.47% to 27.79%. These metrics underscore Qualcomm's ability to deliver strong value to shareholders and maintain a competitive edge.
Section 2: Business Updates and Financial Highlights
2.1 Recent Updates:
The below picture gives an overview of the recent updates:
2.2 Insights of Q4FY24:
Section 3: Key Risks and Outlook:
Section 4: Stock Recommendation Summary:
4.1 Technical Summary:
Price Performance:
4.2 Fundamental Valuation
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 21, 2025. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Note 4: The report publishing date is as per the Pacific Time Zone.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.
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