Breakout Alert: Qualcomm Just Hit The Rally Button

Key Points

• Qualcomm smashed analyst expectations last night with its latest earnings. 
• Analysts are calling for nearly 35% upside from current levels.
• After months of consolidation, shares are on the verge of breaking out. 

Qualcomm Inc. NASDAQ: QCOM, the California-based semiconductor heavyweight with a market cap of $192 billion, has had a decent year. It started with a bang and continued 2023’s rally all the way to a fresh all-time high in June before shares slid 35% into August. 

Since then, they’ve been consolidating their gains and setting a strong foundation for the next leg of the rally. Last night’s earnings report should offer a fresh spark, and there are plenty of reasons to believe that this stock could be gearing up for another run toward new highs. Let’s dive in and see why this tech giant is worth getting excited about.

Qualcomm's Fundamental Performance

To start with, let’s take a look at Qualcomm’s earnings report, which came out after the bell rang to end yesterday’s session and which gave investors plenty to smile about. Qualcomm not only smashed analyst expectations for both its revenue and earnings but also announced an impressive $15 billion share buyback program while raising forward guidance. 

These are two of the most bullish signals a company can give to the market, and they show the level of confidence management has in the company’s future. Qualcomm CEO Cristiano Amon summed up, “We are pleased to conclude the fiscal year with strong results in the fourth quarter, delivering greater than 30% year-over-year growth in EPS.” 

Bullish Analyst Updates

Beyond its bullish fundamental performance, Qualcomm has been catching the attention of analysts. Just this week, the team at JPMorgan reiterated their Overweight rating on Qualcomm shares, emphasizing the company’s promising growth trajectory. This echoed a similarly bullish stance from Susquehanna last month, whose $230 price target still points to a potential upside of some 35% from where the stock closed on Wednesday. 

These updates suggest growing confidence in Qualcomm’s long-term potential, especially as the company makes strides with its 5G and Internet of Things units. With a big Investor Day scheduled for November 19, the company will have even more of an opportunity to highlight its growth and diversification strategy further. For investors considering getting involved, this could be a key catalyst to position ahead. 

Potential Concerns

With all that being said, it has to be noted that not everyone on Wall Street is completely bullish on Qualcomm. Some analysts, such as those from Citigroup and Cantor Fitzgerald, have rated the stock Neutral in the past month.

Both cited sector-specific risks, such as potential supply chain disruptions and competitive pressures, as headwinds worthy of caution. However, following this week’s earnings beat and optimistic guidance, it’s reasonable to think these concerns must have dissipated somewhat. 

Getting Involved With Qualcomm Stock

The stock’s technical setup is another reason to be excited, and it appears to be on the verge of a breakout. Qualcomm shares were trading up more than 5% in Thursday’s pre-market session, which would put them at their highest level since before August’s dip.

This would also mean they’re trading above the narrow range they’ve been stuck in for the past 3 months, which suggests the bulls have firmly taken control. It’s worth noting that Qualcomm’s Relative Strength Index (RSI) is only around 54 right now, suggesting there’s a ton of room for upward movement if a breakout is indeed on the cards. 

With the broader market hitting new highs, the current risk-on environment should benefit growth stocks like Qualcomm in particular. We could be looking at the start of a post-election rally across equities, which will only add fuel to that which was started by the Fed trimming rates. Given Qualcomm’s surprisingly strong fundamental performance and the red-hot macro environment that’s taking shape right now, investors shouldn’t be too surprised if Qualcomm starts making short work of that $230 target.