Qualcomm vs. Broadcom Stocks: Two Leading Chip Stocks for 2024


Amid the surge in artificial intelligence (AI) developments, the tech stock arena witnessed a remarkable 2023. Investors are actively seeking growth stocks poised for strong returns in the ever-evolving technology landscape. Two major players in the semiconductor industry, Qualcomm (NASDAQ:QCOM) and Broadcom (NASDAQ:AVGO) have consistently captured the attention of investors eyeing sustained growth. Qualcomm’s stock saw a 35% increase last year, while Broadcom’s stock surged by an impressive 102%, outperforming the tech-heavy NASDAQ Composite’s gain of 44.5%.

As technology and AI continue to shape the industry, a comprehensive understanding of each company’s strengths and weaknesses becomes pivotal in selecting the ideal growth stock for 2024.

Qualcomm Stock: Wireless Communication Titan

Qualcomm Incorporated, renowned for its wireless communication technologies, has maintained a dominant presence in the industry for decades. With a focus on innovation in mobile processors, modems, and chipsets, Qualcomm has positioned itself as a key player in the 5G revolution. The company’s Snapdragon processors power not only a substantial portion of smartphones globally but also tablets, wearables, and automotive systems, ensuring a consistent revenue stream.

However, in the face of macroeconomic challenges such as rising inflation affecting consumer spending on electronics, Qualcomm experienced a 24% year-over-year decline in Q4 fiscal 2023 revenue to $8.7 billion, with earnings dropping by 35% to $2.02 per share. Despite challenges in the mobile market, Qualcomm’s expansion into automotive, IoT, and networking solutions presents new growth opportunities. The company’s dividend yield of 2.28% and a manageable payout ratio of 36% add to its investment appeal. Nevertheless, Qualcomm’s vulnerability to the cyclical nature of the mobile device market remains a concern.

The potential recovery in the smartphone market and recent advancements in AI capabilities, including the introduction of the Snapdragon X Elite and Snapdragon 8 Gen 3, contribute to Qualcomm’s positive outlook. The company is set to report Q1 fiscal 2025 results on Jan. 31, with management expecting revenue between $9.1 and $9.9 billion and earnings per share between $2.25 and $2.45. Analysts anticipate EPS of $2.37 on revenue of $9.49 billion for the same period. For the full fiscal year 2024, analysts project a 5.6% revenue increase to $37.83 billion, with a 9.04% YoY growth in earnings to $9.19 per share.

Recent upgrades by analysts, such as Citi’s Christopher Danely, who raised the rating to “buy” and increased the target price to $160, reflect optimism in Qualcomm’s potential recovery. Wall Street maintains a “moderate-buy” rating, with a consensus target price of $139.14, suggesting a potential upside of 23.4% from current levels.

Broadcom Stock: Diversified Technology Giant

Broadcom, a global technology company with a diverse product portfolio, has delivered an astounding 1,927% return on its stock over the past decade. Its revenue has surged from $6.9 billion in fiscal 2015 to $35.8 billion in fiscal 2023, accompanied by a remarkable increase in earnings per share from $8.98 to $32.98 during the same period.

In fiscal 2023, Broadcom’s Semiconductor Solutions segment contributed 79% to total revenue, witnessing a 9% increase in semiconductor revenue and a 3% rise in infrastructure software revenue. To further expand its AI capabilities in infrastructure software, Broadcom acquired Symantec’s Enterprise Security Business and CA Technologies.

Despite macroeconomic challenges, Broadcom achieved an 8% YoY revenue increase to $35.8 billion in fiscal 2023, with earnings per share rising to $42.25. The strategic acquisition of cloud software company VMware for $61 billion aims to diversify Broadcom’s business and contribute significantly to infrastructure software revenue and pro forma EBITDA over the next three years.

For fiscal 2024, management forecasts a substantial 40% YoY revenue jump to $50 billion, with adjusted EBITDA potentially accounting for 60% of projected revenue. Analysts predict revenue growth of 39% to $49.7 billion, accompanied by an 11% earnings growth to $46.92 per share.

Broadcom’s dividend yield of 1.9%, a payout ratio of 37%, and strong financials, including $14 billion in cash and cash equivalents, position the company for strategic AI investments, acquisitions, debt repayment, and dividend payments. Analysts anticipate an 18% increase in earnings for fiscal 2025, and AVGO is currently trading at 19 times forward 2025 earnings.

Wall Street unanimously rates Broadcom as a “strong buy,” with 18 out of 22 analysts giving it a “strong-buy” rating and the remaining four recommending a “hold.” While Broadcom is trading close to its average target price of $1,106.70, the high target price of $1,250 implies a potential upside of 13.4% in the next 12 months.

Conclusion: The Better Pick for 2024

In conclusion, both Qualcomm’s dominance in 5G technology and Broadcom’s diversified portfolio, coupled with AI-led growth, present compelling investment cases. While both companies are strong long-term growth stocks, Broadcom stands out due to its diverse product portfolio and ability to provide comprehensive solutions across multiple sectors. The company’s outstanding AI-integrated product portfolio and strategic acquisitions position it favorably for exceptional growth in the coming years, making it the preferable stock pick for 2024.

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