We recently published a list of the 11 Most Undervalued Quality Stocks to Buy Now. In this article, we are going to take a look at where Qualcomm Inc. (NASDAQ:QCOM) stands against other undervalued quality stocks to buy now.
On February 24, Kayne Anderson Rudnick chief market strategist Julie Biel joined ‘The Exchange’ on CNBC to discuss her thoughts on how good quality companies can ride out turbulence in the market. Just like Warren Buffett and Charlie Munger, Biel also suggests inaction as an investment principle and believes that holding high-quality companies can help investors deal with market volatility. She emphasized conviction in investing instead of impulsive decision-making. Biel also noted the general resilience of the US economy, which mainly comes from a robust jobs market as it fuels the consumer-driven economy. She also expressed unease over the limited tools available to address a potential recession that could come from high levels of deficit spending. She thinks inefficient businesses should be allowed to fail while protecting employees during economic cycles.
Biel addressed small-cap stocks and explained that they struggle due to their higher leverage and sensitivity to prolonged higher interest rates. They often include significant exposure to real estate and banking sectors and have a high proportion of non-earning companies. She then emphasized that even if one were to invest in small caps, the ideal approach would be to look at high-quality small-cap companies that can yield strong results. Biel’s stock picks are quality companies that focus on tangible and physical solutions instead of those with foundations in hyped technologies like AI. While she acknowledged AI’s potential, she argued that it’s becoming standard and can no longer be categorized as a differentiator.
Our Methodology
We sifted through the Vanguard U.S. Quality Factor ETF holdings to compile a list of the top stocks that had a forward P/E ratio under 15 as of April 14. We then selected the 11 undervalued stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A technician testing the latest 5G device, demonstrating the company’s commitment to innovation.
Qualcomm Inc. (NASDAQ:QCOM)
Forward P/E Ratio as of April 14: 11.98
Number of Hedge Fund Holders: 79
Qualcomm Inc. (NASDAQ:QCOM) develops and commercializes foundational technologies for the wireless industry. It operates through three segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI). It also provides development, services and sells products to the US government agencies and their contractors.
On March 11, TD Cowen analyst Joshua Buchalter maintained a Buy rating on the company with a $195 price target. The analyst is optimistic about the company’s ability to expand its business beyond the traditional handset market. The firm thinks that Qualcomm’s focus on low-power and connectivity-focused product portfolio will help it tap into high-growth opportunities within the IoT and automotive sectors.
However, Qualcomm’s chipset business within its QCT (Qualcomm CDMA Technologies) generates most of its revenue, particularly the handset sales. In FQ1 2025, QCT achieved record revenues of $10.1 billion. Handset revenues alone reached a record $7.6 billion, which was up 13% year-over-year. For FQ2, Qualcomm Inc. (NASDAQ:QCOM) projects QCT handset revenues to increase by ~10%, which will be driven by the increased shipments of the Samsung Galaxy S25 smartphones.
Nightview Capital is bullish on the company due to its shift into high-growth automotive and IoT markets. It stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q4 2024 investor letter:
“Semiconductors are the unsung heroes of the modern economy, powering everything from AI and 5G to electric vehicles and renewable energy systems. Without them, innovation stalls. The semiconductor industry has entered a supercycle, driven by unprecedented demand across industries that rely on advanced computing. And while this notoriously boom and bust industry has seen cycles before we believe this cycle remains in relative infancy.
These advancements aren’t incremental. As AI systems scale, the need for cutting-edge semiconductors will only accelerate. We believe the companies at the forefront of this revolution are foundational to the next wave of global progress.
Qualcomm Inc. (QCOM): Core Opportunity: Qualcomm is transitioning beyond its traditional handset business, focusing on high-growth markets in Automotive and Internet of Things to drive future revenue streams. We have already seen this strategy flowing through the PnL and we are confident in the firm’s execution abilities going forward.
Competitive Advantage: Automotive Strength: Automotive revenue rose ~55% in FY 2024 to $2.9 billion, further supported by over 10 new design wins with global automakers for advanced driver-assistance systems (ADAS), connectivity, and digital cockpit solutions.
IoT Growth: IoT revenue reached $1.4 billion, reflecting steady traction in smart devices and industrial applications…” (Click here to read the full text)
Overall, QCOM ranks 4th on our list of the most undervalued quality stocks to buy now. While we acknowledge the growth potential of QCOM, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than QCOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
