Qualcomm’s (NASDAQ:QCOM) automotive segment should expand, but it has little impact on QCOM stock (NASDAQ:QCOM) price.
Qualcomm’s (QCOM) first automotive investor day has refocused the company’s attention away from smartphones. The chipmaker has expanded into non-smartphone products. Qualcomm is now making its mark in the automotive sector after focusing much of its previous effort on the metaverse.
The question for stockholders and potential investors is how the automotive pivot will affect QCOM stock (NASDAQ:QCOM). Let us investigate further.
Automotive investor day at Qualcomm
Qualcomm drew attention in the automotive industry in 2016 when it announced a “breakthrough automotive processor.” However, 2022 could be the year that puts Qualcomm’s automotive division on the map. Following the Qualcomm Digital Chassis launch in January, the company recently held an investor day.
Its digital chassis incorporates 5G, telematics, location, and other technologies into a collection of cloud-connected platforms. This controls a vehicle’s communications within a digital cockpit, driver assistance, and self-driving functions.
With such functionality, Qualcomm now estimates the size of its design-win pipeline at $30 billion, a more than $10 billion increase since its most recent earnings report. Furthermore, Qualcomm believes that its total addressable market will reach $100 billion by 2030, and it has forecasted automotive revenue growth accordingly.
The investor quandary
The issue is that QCOM stock (NASDAQ:QCOM) has yet to reach that degree. Automotive earned $350 million in sales during its fiscal third quarter (which ended June 26). This equates to around 3% of the company’s sales.
In contrast, phones accounted for around 56% of the company’s sales and increased by 59% year over year, outpacing cars, which rose by 38%.
With the 5G upgrade cycle, however, handset growth has remained robust. This resulted in 36% revenue growth for Qualcomm in Q3 and a 53% rise in net profitability as Qualcomm kept costs and expenditures underline.
Furthermore, investors may be underestimating the company’s existing worth. Despite its expansion, QCOM stock (NASDAQ:QCOM) is only trading at 11 times earnings. Except for Intel, this is lower than any other significant semiconductor maker. However, unlike Intel, Qualcomm is a technical leader, signaling that QCOM stock (NASDAQ:QCOM) is significantly undervalued.
Consider Qualcomm Stock, but not for automotive applications.
Qualcomm (QCOM) is a high-growth semiconductor company with an absurdly cheap value. This condition may indicate that it is time to purchase QCOM stock (NASDAQ:QCOM). Furthermore, after its automotive-investor day, Qualcomm’s future in the automotive industry seems positive, as smartphone chipsets will probably become a less critical revenue generator.
However, investors seeking a revenue engine in the automotive sector may not find one in Qualcomm just yet. While it is expected to become a more prominent participant in the vehicle industry, QCOM stock (NASDAQ:QCOM) will likely be more closely linked to its other businesses for the foreseeable future.
Featured Image – Megapixl © nikkimeel
Author Okoro Chinedu 
