We recently compiled a list of the 12 Undervalued Wide Moat Stocks to Buy According to Analysts. In this article, we are going to take a look at where QUALCOMM Incorporated (NASDAQ:QCOM) stands against the other undervalued wide moat stocks.
As per BlackRock, European equity gains have managed to outpace the US to start 2025. Despite this, the asset manager expects the US to reclaim leadership this year as the corporate earnings strength and the AI theme broaden out. The US equities have long exceeded the performance of their global peers. BlackRock expects that this has been made possible because of deeper capital markets and relative deregulation which promote risk-taking. The US can keep its edge, despite the S&P 500 lagging so far this year.
Markets to Broaden Out in 2025, Says BofA
As per Savita Subramanian, head of US Equity and Quantitative Strategy for BofA Global Research, the market has been broadening out. Last year and the year before that, the mega-cap tech companies managed to outperform the rest of the S&P. However, in the current year, broader market trends are visible. As per Subramanian, higher productivity and reshoring of manufacturing to the US are the 2 positive forces that are expected to fuel potential market growth beyond the tech sector.
As per Reuters, the volatility is expected to increase due to tariff announcements, policy changes from President Donald Trump, and job cuts, resulting in uncertainty. Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan, has a year-end forecast for the S&P 500 of 6,500 as his “base case.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
BlackRock Remains Overweight on US Stocks
BlackRock expects that mega-cap tech and other AI-linked stocks will keep driving the US equity returns, mainly as and when the AI adoption grows. That being said, there are signs of earnings strength broadening beyond technology. The analysts now anticipate tech to post 18% earnings growth this year in comparison to 11% for the broader index. As per the LSEG data, this is a smaller gap versus 2024.
Overall, strong economic growth, broadening of earnings growth and a quality tilt underpin the firm’s conviction and overweight in US stocks as compared to other regions. The valuations for the big tech are backed by healthy earnings, and less lofty valuations for several other sectors. As per Kristy Akullian, CFA, Head of iShares Investment Strategy, there are tailwinds potentially favoring US equities over the rest of the world, mainly large-cap companies. The relatively easy financial conditions, healthy consumer balance sheets, and the expectations of deregulation and tax cuts continue to support the positive view.
Our Methodology
To list the 12 Undervalued Wide Moat Stocks to Buy According to Analysts, we used a screener and sifted through several media reports to choose companies having an economic moat and that analysts see upside to. Next, we filtered out the ones that trade at a forward P/E of less than ~20.0x. Finally, the stocks are arranged in ascending order of their average upside potential, as of February 28.
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 Incorporated (NASDAQ:QCOM)
Average Upside Potential: ~24.3%
Forward P/E as of February 28: ~13.5x
Number of Hedge Fund Holders: 79
QUALCOMM Incorporated (NASDAQ:QCOM) is engaged in the development and commercialization of foundational technologies for the wireless industry. The company’s patent portfolio continues to strengthen its wide economic moat. Also, its intellectual property and R&D expertise in wireless technologies are some of the factors that offer the company a competitive edge. QUALCOMM Incorporated (NASDAQ:QCOM)’s healthy position in 5G technology offers a strong foundation for future growth. With 5G networks expanding globally, demand for the company’s modem and RF front-end solutions is projected to remain strong.
Its technological leadership in this area can enable it to maintain a robust market position despite higher competition. QUALCOMM Incorporated (NASDAQ:QCOM)’s Snapdragon processors appear to be well-suited for AI-enabled PCs requiring a balance of performance and energy efficiency. In the smartphone market, the company’s focus on AI capabilities in its mobile processors can help maintain a healthy position. With AI becoming important in mobile devices, QUALCOMM, Incorporated (NASDAQ:QCOM)’s ability to offer integrated solutions combining 5G connectivity with advanced AI processing can act as a critical differentiator.
Madison Investments, an investment advisor, released its Q3 2024 investor letter. Here is what the fund said:
“Alphabet Inc., Eli Lilly and Company, QUALCOMM Incorporated (NASDAQ:QCOM), Microsoft Corporation, and Apple Inc. were the largest detractors. Qualcomm has given back some of its first half gains after the CFO commented at a conference that its entrance into the AI PC business would take time to ramp. We continue to see Qualcomm as well positioned with growth from AI moving into the mobile phone, from new opportunities in the Internet of Things (IoT), and within the Auto industry but will also look to future growth as they enter the PC market.”
Overall QCOM ranks 5th on our list of the undervalued wide moat stocks to buy according to analysts. While we acknowledge the potential of QCOM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
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Disclosure: None. This article is originally published at Insider Monkey.