To The Moon

$Qualcomm(QCOM)$

Inventor of mobile communication standards secures market leadership: Qualcomm has been leading the development for mobile communication standards and owns multiple patents and intellectual property across 5G/4G/3G standards. Besides monetizing the technology know how through licensing, Qualcomm also offers various connectivity solutions and products for smartphone makers, automotive customers, Internet of Things device makers and companies in the networking industries. It is No.1 in the supply of radio frequency + modem chips and No.2 in the supply of processor chips for the smartphone industry. It is the market leader in the supply of telematics solutions to the automotive industry and is building out the connected car ecosystem.

Technology leadership and innovation drive positive growth outlook: With its technology leadership status in connectivity solutions, Qualcomm has an enviable position of earning license fees from its inventions. The fees grow in line with proliferation of new devices and the advent of new technologies. With its know how, Qualcomm has identified smartphone, IoT and automotive industries as the key areas to focus its innovations on. 5G network penetration will drive higher demand for 5G smartphones while proliferation of IoT devices will drive demand for wireless semiconductor components. Connected cars and development of self-driving vehicles over multi year periods will ensure strong sustainable growth.

15 key industry trends to expand addressable market size 7x to over USD 700 bn over 10 years. Qualcomm identified 15 key industry trends that will support its growth and market expansion opportunities over the next decade. It sees addressable market expansion from about USD 100 bn currently to over USD 700 bn at the end of the period. It's aspirational but does point to significant growth opportunities for Qualcomm. Rising semiconductor content and its innovation led tech leadership drives pricing power and margins supporting higher shareholder returns. Near term, Qualcomm projects a mid- teens 3-year revenue CAGR and sees revenue of USD 46 bn and operating margin of 30% in FY24.

Risks

Key growth risk for Qualcomm in the near term is slower than expected demand growth for 5G mobile devices given the current dependence on this core segment. Worse than expected competition from Mediatek or emerging Chinese competition eg Hi-Silicon could lead to negative share price reaction first and subsequent share losses. Failure to execute on its growth plans in both the IoT and automotive segments could lead to disappointment over its longer term growth targets. From the looks of it, I will be cautious due to the cyclical downturn.

@TigerStars

DYODD