Qualcomm’s (QCOM, Financial) downturn started in 2014 after reaching a value of $81 per share, but the company successfully reversed its fortune in 2016, as the stock was up over 50% from its 52-week low. On the other hand, the company also managed to beat analyst estimates in terms of earnings and revenue in each of the four quarters of the previous year.
The primary reason behind the company’s turnaround in 2016 was the robust performance of its most significant mobile chip as well as patent licensing businesses. As a matter of fact, the company’s mobile chip business came under pressure when Samsung excluded it from its flagship Galaxy S6 models.
However, the company gained its position back in the Galaxy S7 models (some particular regions), which was a great win for the company.
The worldwide smartphone market is projected to reach 2.35 billion units in 2019, a surge of just 0.39 billion units compared to that in 2014, according to a report from CCS Insight. Moving ahead, the report also throws light on the fact that regardless of unrelenting growth in emerging market, sales in developed markets are poised to peak this year, before tumbling to lower levels.
Currently, Qualcomm holds a secure and robust position in the smartphone market, but keeping in mind the slowing smartphones sales; the company is putting effort to diversify its revenue stream. Nowadays, the Internet of Things market accounts for the hottest growth area and is expected to turn into the most significant source of growth for semiconductor players in the upcoming years.
To benefit from the rise of IoT market, Qualcomm made a $37 billion bid for chip manufacturer NXP Semiconductors (NXPI, Financial) in October and anticipates the purchase to lift its IoT prospects. Moreover, the company publicized that its 5G leadership together with proposed acquisition of NXP Semiconductors further accelerates its position in several growth segments such as automotive and networking.
NXP Semiconductors turned itself into a major player in the automotive industry after acquiring Freescale Semiconductor, and now Qualcomm will use the NXP purchase to enter the rapidly growing semi-autonomous car market, while gaining advantages from NXP’s Internet of Things position in the NFC and radio-frequency identification segments.
Summing up
Qualcomm has definitely played a smart move by proposing an acquisition offer. If the deal goes through successfully, it will unlock several growth opportunities for the company in the year ahead. As a result, stockholders should continue to hold the stock for long-terms gains.
Disclosure: No position in the stocks mentioned in this article.
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