Qualcomm (QCOM): IoT And Consumer Drones To Boost Growth

On Sep 12, we issued an updated research report on QUALCOMM Incorporated QCOM -- the market leader in mobile chipsets.

Qualcomm recently tied up with AT&T Inc. T to evaluate Unmanned Aircraft Systems (UAS) or drones on commercial 4G LTE networks. Notably, there is a growing consensus that consumer drones will play a pivotal role for consumer businesses in future. Although majority of Qualcomm’s revenues come from mobile phones and tablets, the market is maturing, with companies making few innovations. The possibilities of stagnation in this segment have encouraged it to foray into the new space.

Qualcomm is expected to gain significant traction in China in the near term through the signing of new patent license agreements with Chinese smartphone makers. Also, Qualcomm has lined up its latest flagship smartphone System on Chip (SoC) – the Qualcomm Snapdragon 821 – to power next-generation smartphones. The company hopes to deliver better performance with this chipset compared to its predecessor, Snapdragon 820.

Qualcomm is also widening its presence in adjacent spaces, including automotive, networking, mobile computing and IoT which bodes well for long-term growth. The company is working with Alphabet Inc. GOOG to develop and power Android Auto in-car solutions with its Snapdragon automotive processors. The partnership should help the company accelerate innovation in the auto space, creating next generation in-car experiences and establishing a new revenue stream.

However, the company has been facing challenges from low-cost chip manufacturers like MediaTek and Rockchip as well as handset manufacturers’ SoC (System on Chip) projects such as Exynos by Samsung. Handset makers like Sony Corporation SNE have also been increasingly adopting MediaTek’s low-priced yet efficient chipsets.

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Qualcomm currently has a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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