What is QCOM's Intrinsic value?

Qualcomm Inc (QCOM) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Qualcomm Inc's estimated intrinsic value ranges from $82.86 to $228.13 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $228.13 +50.8%
Discounted Cash Flow (5Y) $178.55 +18.0%
Dividend Discount Model (Multi-Stage) $150.95 -0.2%
Dividend Discount Model (Stable) $124.60 -17.7%
Earnings Power Value $82.86 -45.2%

Is Qualcomm Inc (QCOM) undervalued or overvalued?

With the current market price at $151.31, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Qualcomm Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.23 1.37
Cost of equity 9.5% 12.5%
Cost of debt 5.0% 5.0%
Tax rate 6.3% 10.3%
Debt/Equity ratio 0.09 0.09
After-tax WACC 9.1% 11.9%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 10.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $38,962 (FY09-2024) to $84,274 (FY09-2034)
  • Net profit margin expansion from 26% to 35%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $179 $204,898M 74.9%
10-Year Growth $228 $259,730M 57.2%
5-Year EBITDA $245 $278,138M 81.5%
10-Year EBITDA $287 $325,386M 65.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 34.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 11.0%
  • Long-term growth rate: 3.5%
  • Fair value: $150.95 (-0.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.5% (Low) to 9.5% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $70 to $179
  • Selected fair value: $124.60 (-17.7% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $10,223M
Discount Rate (WACC) 11.9% - 9.1%
Enterprise Value $86,057M - $112,074M
Net Debt $7,420M
Equity Value $78,637M - $104,654M
Outstanding Shares 1,106M
Fair Value $71 - $95
Selected Fair Value $82.86

Key Financial Metrics

Metric Value
Market Capitalization $167349M
Enterprise Value $174769M
Trailing P/E 15.16
Forward P/E 14.86
Trailing EV/EBITDA 16.75
Current Dividend Yield 223.94%
Dividend Growth Rate (5Y) 6.35%
Debt-to-Equity Ratio 0.09

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $68.44
Discounted Cash Flow (5Y) 25% $44.64
Dividend Discount Model (Multi-Stage) 20% $30.19
Dividend Discount Model (Stable) 15% $18.69
Earnings Power Value 10% $8.29
Weighted Average 100% $170.24

Investment Conclusion

Based on our comprehensive valuation analysis, Qualcomm Inc's weighted average intrinsic value is $170.24, which is approximately 12.5% above the current market price of $151.31.

Key investment considerations:

  • Strong projected earnings growth (26% to 35% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.09)
  • Historical dividend growth of 6.35%

Given these factors, we believe Qualcomm Inc is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.