Wondering which direction Qualcomm’s (NSDQ: QCOM) stock is headed?

Given how popular other tech stocks have become, is it time for you to pounce on this cheaper alternative?

In this edition of Investing Daily you’ll discover:

• What makes Qualcomm’s stock unique compared to some of its rivals
• Qualcomm’s performance In 2017/2018.
• If you should buy Qualcomm?
• If you should sell Qualcomm?
• And our final forecast and outlook for Qualcomm in 2019.

Let’s dive in and get some answers.

First Of All, Who is Qualcomm?

Based in San Diego, California, Qualcomm is a semiconductor and telecommunications equipment company that designs and markets wireless telecom products and services.

With a market cap around 90 billion, Qualcomm is a crucial player in the smartphone industry. The company owns intellectual property tied to code division multiple access (CDMA), a vital technology that underpins all 4G sand 5G standards.

AT&T (NYSE: T), Verizon (NYSE: VZ), and other major carriers this year are launching faster and more robust 5G networks.

Qualcomm earns a royalty based on the price of every 4G and 5G handset sold, whether that handset is an Apple (NSDQ: AAPL) iPhone, Samsung (OTC: SSNFY) Galaxy, or a host of other hot-selling devices.

How Has Qualcomm Stock Performed?

The stock clearly has been under pressure. Qualcomm’s stock has fallen 3.96% year to date. The stock has gained 16.31% over the past 12 months, but fallen 6.16% over the past two years and fallen 10.41% over the past five years.

The broader market has generally performed better, especially over the long haul. The benchmark SPDR S&P 500 ETF (SPY) has fallen 2.1% year to date, gained 3.9% over the past 12 months, gained 27.22% over the past two years, and gained 50.57% over the past five years.

What Is Qualcomm Stock History?

“Headline risk” has driven down Qualcomm’s share price, as adverse events directly related to the company generate uncertainty for investors and volatility for the share price.

Qualcomm has lost pivotal fights in court with suppliers and rivals. The escalating trade war also has taken a toll by scuttling proposed mergers. Not only the S&P 500 but also the chipmaking sector as a whole has outperformed QCOM.

While other chipmakers have prospered, Qualcomm has frustrated shareholders who keep waiting for the company to turn the corner.

The benchmark iShares PHLX Semiconductor ETF (SOXX) has racked up a whopping five-year gain of 126.66%, leaving Qualcomm in the dust.

There is speculation that the decline of smartphone sales is fueling Qualcomm’s decline. Below is a quick video going more into detail.

How Has Qualcomm Performed In 2017/2018?

The years 2017 and 2018 have not been kind to Qualcomm. Year to date, QCOM has fallen a bit relative to the S&P 500 as a whole. In 2017, QCOM fell 2.21%, compared to a gain of 18.72% for the S&P 500.

Although it occupies the super-hot semiconductor sector, Qualcomm has somehow managed to miss the greatest bull market in history. A rising tide does not lift all boats, especially if the boat has a few holes in it.

Who Are Qualcomm’s Rivals?

Qualcomm’s top three rivals are Advanced Micro Devices (NSDQ: AMD), NVIDIA (NSDQ: NVDA), and Intel (NSDQ: INTC).

Qualcomm’s position in making chips for autonomous cars has come under assault by other innovative chipmakers, such as Advanced Micro Devices and NVIDIA. At the same time, Intel’s entry into making chips for smartphones is a direct assault against Qualcomm.

Advanced Micro Devices (AMD)

AMD’s core products include microprocessors, motherboard chipsets, embedded processors, central processing units (CPUs), and graphics processing units (GPUs).

Advanced Micro Devices has been diversifying into breakthrough technologies, such as virtual reality (VR), artificial intelligence (AI), cloud computing, and the Internet of Things (IoT). Qualcomm has made failed attempts to penetrate these markets.

Read Also: What’s Our Stock Prediction For AMD In 2019?

NVIDIA

NVIDIA designs graphics processing units (GPUs) for the gaming and professional markets. The firm also makes system-on-a-chip units (SoCs) for the mobile computing and automotive markets.

QCOM faces the same situation that bedeviled NVIDIA about five years ago. NVDA stock was flat-lining as demand for gaming chips dipped. NVDA was shrewd enough to diversify into artificial intelligence and “blockchains” for cryptocurrencies. QCOM has shown no signs of being as nimble.

Read Also: What’s Our Stock Prediction For Nvidia in 2019?

Intel

Cloud computing and the mobile Internet are exploding in growth and the “big data” centers running the world’s digital economy need powerful computer servers. These servers run on ultra-fast chips produced by Intel.

Qualcomm in recent months has made tentative and ultimately failed attempts to break into the server chip business, leaving QCOM more dependent than ever on a smartphone business that’s starting to stagnate.

Will Qualcomm Go Up In 2019 (Should You Buy)?

The bulls argue that Qualcomm is a “value play,” because its shares are cheap relative to the broader market and its rivals.

QCOM sports a forward price-to-earnings (P/E) ratio of 14.5, compared to 17.1 for the S&P 500, 17.2 for information technology, 12.5 for semiconductors, and 15.4 for telecommunications equipment.

However, there’s a difference between a value play and a value trap. Sometimes, a stock is cheap for a reason — pessimism over its growth prospects are warranted.

Will Qualcomm Go Down In 2019 (Should You Sell)?

Selling pressure on QCOM shares has been fueled by legal battles that Qualcomm eventually lost over royalty rights with Apple.

The failure of Qualcomm’s plans to acquire rival NXP Semiconductors (NSDQ: NXPI) also have weighed on the stock.

As retaliation for tariffs imposed against China by the White House, China stepped in to delay the QCOM/NXP marriage. Qualcomm management finally nixed the $44 billion deal altogether.

The escalating trade war is another headwind. Tit-for-tat tariffs are undermining corporate mega-deals across the board. Qualcomm has taken some of the worst hits.

The Trump administration this year blocked Singapore-based chipmaker Broadcom (NSDQ: AVGO) from buying rival Qualcomm, a merger both companies wanted.

The White House expressed concern that a Broadcom-Qualcomm merger would tilt the semiconductor playing field in favor of China, which the Trump administration is increasingly holding up as the international boogeyman.

Washington’s action to block the $117 billion marriage of the two chipmakers is exacerbating geopolitical tensions. Broadcom isn’t based in China. However, China and its Asian neighbor Singapore have nurtured close relations. The fear is that China exerts growing influence on Singapore and the region, which would give the Middle Kingdom too much sway over the combined companies.

Regardless, the decision was a serious blow to Qualcomm and the news initially clobbered the stock.

Qualcomm Our Overall Stock Outlook For 2019

Another powerful long-term headwind for Qualcomm is the contraction of the smartphone market. Sales of smartphones were hot for many years, which in turn filled Qualcomm’s coffers with revenue and earnings.

But as the chart shows, the smartphone market is becoming saturated and sales of these devices are declining:

Gartner recently reported the first ever decline in smartphone sales since the research firm started tracking these statistics in 2004.

Overall Qualcomm Forecast And Prediction For 2019

Future growth projections don’t bode well for Qualcomm. The average analyst expectation on the low side is that earnings per share (EPS) will come in at $3.54 in full-year 2018, compared to $4.28 in 2017, and EPS will come in at $3.53 in 2019.

Our verdict on Qualcomm: avoid the stock. There are better places to put your money.

If you own the stock, now’s a good time to sell it, as the technology sector as a whole comes under pressure due to waning corporate profits, trade war angst, and fears about overvaluation.

Qualcomm hasn’t been able to prosper when times are good; the firm certainly doesn’t have the wherewithal to weather the storms that are coming.