Will Qualcomm Inc. (QCOM) stock hit $200 next year?

Qualcomm Inc.  is operating as a public company since 1991. The stock has enjoyed a mean annual return rate of 21.1% since then. Much of its recent growth has somehow been linked to the 5G development.

World’s most valuable smartphone maker Apple Inc. has also incorporated 5G technology in its latest iPhone models. The next-generation wireless network will offer speed 100 times faster than 4G.

How Qualcomm could benefit from Apple?

Apple’s first 5G supported iPhone will include Qualcomm’s chip. Apple is expected to ship 200 million units of its 5G-enabled smartphone this year, and up to 500 million units next year, according to a report published earlier this month.

The strong sales forecast for Apple devices will boost chip revenue of Qualcomm, with iPhone shipments expected to increase more than two folds next year.

Qualcomm and Apple in the past fought each other over intellectual property. The two companies were able to resolve their years-long fight in 2019. Following which, Apple was finally able to use Qualcomm’s 5G chip technology.

Apple has already indicated that it plans to use Qualcomm chips in iPhone at least for the next few years, citing improved performance and connectivity they offer.

Recent 5G Developments

Qualcomm last week announced that it has achieved the fastest 5G speeds in Finland. The company made the announcement along with Nokia and Elisa and said they got 8 Gbps speed on a commercial network, marking the fastest in the world so far.

Elisa’s flagship store in Finland was selected to showcase the record speed. The latest development will support several high-bandwidth and low-latency services including high-speed downloads, enhanced performance of virtual reality (VR) applications.

Nokia used its 5G mmWave technology with Qualcomm’s 5G smartphone over a commercial 5G network operated by Elisa to achieve the latest benchmark. Industries will now be able to remotely control gadgets and devices seamlessly in real-time. The companies expect to roll out the service next year.  

5G partnership with Dish Network Corp

Qualcomm inked a deal with U.S-based satellite television service provider Dish Network earlier this month. According to the terms of the agreement, Qualcomm will help Dish in building its 5G network in the next three years using cloud-based platforms.

Dish is using a new technology named Open Radio Access Network (RAN) to build its network across the U.S. RAN uses software instead of physical equipment to manage network functions over the cloud. Dish, with the help of network vendors, plans to use the 5G RAN platforms of Qualcomm.

U.S. tech companies such as Qualcomm, Cisco, and Intel are competing with each other to boost their presence in the telecom equipment market.

Qualcomm vs Huawei 

China-based Huawei Technologies is currently leading the wireless communication patents race. The Chinese technology giant filed 8,607 wireless patents during the ten months ended October 2020, surpassing the U.S-based Qualcomm, which filed for 5,807 patents during the same period.

The United States and China currently dominate the global wireless patent market, as the two countries account for nearly 65 percent of the total patents on a combined basis, followed by Japan and South Korea with 15 percent and 7 percent, respectively.

Qualcomm was a key supplier for Huawei until U.S. authorities last year imposed a ban on U.S-based semiconductor companies that restricted them from supplying chips to Huawei. One of the main reasons behind the ban was increasing trade-conflict between the two biggest economies of the world.

However, the U.S. government made an exception for Qualcomm last week. The San Diego, California-based company can now sell 4G smartphone chips to Huawei. The details about the specific 4G products were not disclosed by the company, except for one thing that they were related to mobile devices.

Few other companies, such as AMD, also received permission to supply to Huawei.   

Experts believe the latest permission would have a limited impact on Qualcomm’s overall sales, as it can only sell 4G chips while most of the customers around the world plan to shift to the latest 5G devices. Looking forward, it is still unclear if U.S. authorities will permit the company for selling 5G mobile chips to Huawei.

Financial progress of Qualcomm

Like many other industry rivals, Qualcomm also announced its financial results for the fourth quarter earlier this month that easily surpassed the consensus forecast. The company posted adjusted earnings of $1.45 per share for the three months ended September 30, easily beating analysts’ average estimate of $1.17 per share. Revenue for the fourth quarter came in at $6.5 billion, above $5.93 billion forecasted by analysts.

Revenue at Qualcomm Technology Licensing (QTL) segment jumped 30 percent to $1.51 billion on a year-over-year basis. QTL makes money by collecting the licensing fee from other tech firms due to the several telecommunication patents it owns.

The company also offered financial guidance for its fiscal first quarter. It projected adjusted earnings in the range of $1.95 per share to $2.15 per share for the quarter, and revenue between $7.8 billion and $8.6 billion.

Analysts coverage

Qualcomm stock has performed well in the recent months. Its share price has increased more than 65 percent on a year-to-date basis. The stock was trading around a price of $90 in January, as compared to the current price levels of around $145.

Most research firms are bullish on Qualcomm . For instance, Canaccord Genuity raised its price target for the stock to $175 per share, citing strong expected earnings in the coming quarters. Separately, Bank of America believes Qualcomm is poised to do well considering the revenue it is generating from royalties and increased chip prices. Overall, 26 analysts have issued a 12-month price target for Qualcomm stock . The consensus price target for the stock is $158.02, with a high price of $194 and a low price of $112. The mean price target represents a premium of about 8 percent from the stock’s closing price in the last trading session.