Qualcomm stock price analysis: technicals point to a big dive

Qualcomm (QCOM) stock price remains in a deep bear market even as the company considers making a bid for Intel, the giant semiconductor company. It has dropped by over 27% from its highest point this year, giving it a market cap of over $184 billion.

Qualcomm is facing major headwinds

Qualcomm is a major technology company that focuses on making semiconductors that are used in the smartphone industry

Its products are used by some of the biggest companies in the world like Apple, Samsung, Lenovo, and Xiaomi.

The challenge for Qualcomm is that its business is facing major headwinds as the smartphone industry slows down. 

A recent report published by Counterpoint Research showed that smartphone shipments to the United States dropped for six consecutive quarters. There are media reports that Apple’s new iPhone 16 is not seeing strong sales. 

The challenge is that modern-day smartphones are so good that most people are opting to stay with them for a long time. For example, most analysts believe that the changes introduced in iPhone 16 were not all that significant compared to those in iPhone 15.

Additionally, Qualcomm is seeing strong competition from China, where Huawei has built comparable chips. Qualcomm and other American companies have been barred from selling advanced chips to many Chinese firms in the past few years. 

Therefore, the company has started to invest in other industries to offset the slowing smartphone industry. It has invested in areas like automobile, providing solutions like Advanced Driver Assistance Systems (ADAS), cockpit, and car-to-cloud solutions. 

It has also expanded in the Internet of Things (IoT) and smart home solutions industries to offset the slowdown in the smartphone industry. The challenge, however, is that these newer segments are significantly smaller compared to the smartphone division.

The same is true with its recently launched Snapdragon X series, which is powering Microsoft Copilot+ PCs. It is unclear whether the chip will take market share from Intel and AMD, which are the current market leaders in the laptop industry.

Qualcomm Q3 earnings download

The most recent financial results showed that Qualcomm’s revenues rose to over $9.4 billion in the last quarter. Most of this revenue, or $8.4 billion, came from its CDMA technologies. Its automotive and IoT revenues came in at $2.2 billion, meaning that smartphones account for about 62% of its total revenue. The other revenue of $1.3 billion came from its QTL division.

Therefore, its business dynamics explain why Qualcomm may be attempting to buy Intel, a company that still has a large market share in the CPU industry. 

Qualcomm has not confirmed whether it will place a bid for the company. If it did, it would value Intel at over $100 billion, meaning that Qualcomm would need to borrow substantial sums of money and issue a lot of stock. 

Analysts expect that Qualcomm's recovery will continue in the coming years. They expect its fourth-quarter revenue will be $9.9 billion, a 14% increase from the same period in 2023. 

Qualcomm’s revenue for its financial year will be $38.63 billion, followed by $42.17 billion in the next year. Its final numbers will likely be higher than that since the company tends to do better than estimates.

A key concern is about QCOM’s valuation, which some analysts believe is quite expensive. However, looking at its numbers shows that the company was reasonably valued. It has a GAAP trailing P/E ratio of 17.50, which is lower than the industry’s median of 23.7 while its forward multiple stands at 16. 

Analysts also believe that Qualcomm’s stock should be trading at $214, much higher than the current $166. The only analyst with a bearish view on Qualcomm is Wolfe Research, who downgraded it from outperform to peer perform.

Qualcomm stock price analysis

The daily chart shows that the QCOM share price peaked at $230 in June and then retreated by over 27% to the current $166. It has moved to the 50% Fibonacci Retracement point and is attempting to drop below the 200-day moving average.

Most notably, the spread between the 50-day and 200-day moving averages has continued narrowing, meaning that a death cross pattern is possible. A death cross would point to more downside in the near term.

The stock has also formed a rising wedge chart pattern, a popular bearish sign. Also, it has formed what looks like a bearish flag chart pattern.

Therefore, the stock’s outlook is bearish, with the next point to watch being $148.26, the 61.8% Fibonacci Retracement point, which is about 11.5% below the current level.