Qualcomm stock poised for breakout

Key Points

• Shares have lagged behind those of its peers, but that’s about to change. 
• Last year’s headwinds have dissipated, and several bullish tailwinds are emerging. 
• Look for shares to retake last month’s high of $146 and then move quickly towards $160.

Compared to some of the other chipmakers, Qualcomm Inc NASDAQ: QCOM has been trading a little slower in recent weeks. While the likes of Advanced Micro Dynamics, Inc NASDAQ: AMD are up 70% since November, and NVIDIA Corp NASDAQ: NVDA is up 40%, Qualcomm shares are barely up 30%. They’re even being outperformed by the black sheep of the chip stocks, Intel Co. NASDAQ: INTC, whose shares have gained 40% since then, too. 

But this lagging behind its peers looks set to end, and Qualcomm’s comparatively lackluster performance is suddenly turning into an appetizing buying opportunity. Let’s jump in and see why. 

Fresh upgrade

Just last week, the team at Citi upgraded their rating on Qualcomm shares, moving the stock to a Buy rating from Neutral. Having met target customers of chip companies like Qualcomm, Citi feels there are specific buyer trends emerging that put Qualcomm and its product portfolio in a prime position to benefit and capture market share. They’re looking for the company’s guidance to be boosted in the coming weeks, while analyst expectations for its earnings report later this month should be easily topped. 

Citi’s fresh price target of $160 points to further upside of at least 15% from where Qualcomm shares closed on Wednesday, and this should be more than doable in the coming weeks. Having spent much of 2023 consolidating from the 50% haircut shares taken the previous year, Qualcomm’s rally that kicked off last November is very much intact and just screams recovery. If the stock can find its way to $160 in the coming weeks, it will have fully broken out beyond last year’s upper range and will be at its highest level in nearly two years. 

Beyond the bullish outlook from Citi, Qualcomm bulls also have the increased price targets from the teams at Barclays and KeyCorp earlier this week. This kind of optimistic analyst attention goes a long way to fuelling demand and should be enough to tempt in even the more cautious investor. Bank of America has also reiterated its Buy rating on the stock this month and went so far as to call Qualcomm a top pick for 2024. 

Getting involved

Having weathered the worst of the storm brought about by higher interest rates and supply-chain issues, these headwinds are now dissipating, and Qualcomm is looking at perhaps the best tailwinds it has had in a couple of years. The company has done well to position itself at the forefront of the artificial intelligence (AI) revolution and spoke to this very point earlier this month. Qualcomm’s Snapdragon Digital Chassis is set to bring generative AI to vehicles, which will be a game-changer in terms of digital cockpits and automated driving systems. It’s already announced a strategic partnership with Bosch to showcase some of these capabilities. 

The company’s earnings are due out on the last day of January, and investors will be watching closely to see if the increasing optimism from Citi and its peers is justified. There’s a sense of caution at the moment when it comes to Qualcomm stock, but there’s too much going in its favor to justify this right now. Even the broader semiconductor industry is picking up the right kind of momentum, with a report last week showing semiconductor sales rose in November for the first time since August 2022. 

Even from an entry perspective, the dip seen in Qualcomm shares since the start of the month only improves the risk/reward profile. The stock had gotten quite frothy in the final weeks of last year, and its relative strength index (RSI) was screaming overbought. It’s now back at a nice neutral level, which bodes well for a breakout rally in the coming weeks.