Is It Right Time To Buy Qualcomm Stock?

The chip maker has had rough 2015 but the analysts anticipate that the 2016 can be lucky after all.

The San Diego Calif. firm has had not so good 2015. The popular chip maker, Qualcomm Inc.’s stock slumped down by a substantial 30%. In the third quarter alone, the semiconductor manufacturing company’s stock went down by 25% due to the chief reasons of highly dynamic competition from lower end rivals, shrinking market share, and the hard blow from South Korean, Samsung Electronics Co Ltd., when it suspended Qualcomm’s Snapdragon process against its interiorly developed processor.

Nevertheless, the beginning of the year 2016 brought some glad tidings for the Californian company and its stock plunged up. Last month, the $79 billion organization announced that Samsung has taken its processors again for their blockbuster “Galaxy” phone; the “Galaxy S7;” expected to release on March 11, 2016. After the positive tidings, the stock of the company bolstered up by 20%. Both the investors and analysts should consider the following factors before forming an opinion about Qualcomm stock as the future is likely to hold more good news for the company.

According to the credential sources, the chip maker patent licensing business generate about three to five percent off the 3G and 4G phones’ wholesale prices. The revenue cultivated from this segment makes up about a third of total revenue however it covers only 69% of Qualcomm’s operating income. However, the major downside which the company had was when some mobile devices manufacturers, especially in China, underreported the sales of the mobile phones which had adverse impact on the San Diego headquartered firm’s royalty revenue.

Qualcomm, however, is on the signing spree for long term patent licensing agreements. During 2016 first quarter, the chipmaker has closed licensing deals with few top Chines mobile phone manufacturers including, Haier, Xiaomi, ZTE Corporation, and Huawei Technology Co Ltd.. According to the signed deals, the company will be entitled of receiving five-percent royalty on 65% of the selling price of each phone. Through the signed deals, the multinational company will get well deserved boost.

The dividend plans of any company are the real attractor for most of the investors. The dividend currently yielded from the stock is steady 3.72%. Over the past 12 years, the chip maker has been consistently increasing its dividend. The company’s dividend has been raised to $0.48 per share from the prior $0.17, in a matter of just five years. Therefore, forming the opinion on the premises of company’s dividend payout ratio of 61%, the $79 billion semiconductor manufacturing company stock’s dividend is more likely to grow.

Currently, the company’s stock has been trading at 11 times the company’s forward earnings. For a company that is still in its growing stage in the in the communications equipment industry and has a price-to-earnings ratio of 22.5 that’s a huge discount. However, the situation does point out the fact there can be limited downside left in the stock, as, over the past year, the sell-off might be overdone.