Daniell Wright @Twistery: "𝐃𝐞𝐚𝐫 𝐅𝐨𝐥𝐥𝐨𝐰𝐞𝐫𝐬 𝐚𝐧𝐝 𝐂𝐨𝐩𝐢𝐞𝐫𝐬, I hope..."

South Africa

𝐃𝐞𝐚𝐫 𝐅𝐨𝐥𝐥𝐨𝐰𝐞𝐫𝐬 𝐚𝐧𝐝 𝐂𝐨𝐩𝐢𝐞𝐫𝐬, I hope you are doing well. Over the past week I developed a full valuation framework for Qualcomm using two independent discounted cash flow (DCF) models. These models reflect two different economic perspectives on the business: one conservative and reinvestment‑driven, the other focused on long‑term free‑cash‑flow compounding. Both are based on Qualcomm’s historical financial performance and a calculated WACC of 9.60%. The market currently reflects significant skepticism due to the anticipated transition of Apple to its own in-house modems. However, my analysis suggests that the market is pricing in a worst-case scenario, ignoring the explosive growth in Automotive and AI driven PC segments. 𝐐𝐮𝐚𝐥𝐜𝐨𝐦𝐦’𝐬 𝐇𝐢𝐬𝐭𝐨𝐫𝐢𝐜𝐚𝐥 𝐅𝐮𝐧𝐝𝐚𝐦𝐞𝐧𝐭𝐚𝐥𝐬 Using 15 years of financial data: ✅ Revenue CAGR: 9.34% ✅ FCF CAGR: 7.50% ✅ Net Margin: 24.4% ✅ EBITDA Margin: 28.6% ✅ ROE: 34% ✅ ROA: 13.6% These are unusually strong profitability and return metrics for a company still perceived as a cyclical semiconductor business. Qualcomm’s licensing segment (QTL) behaves more like a high‑margin software business, while its chip segment (QCT) introduces cyclicality and working‑capital swings. 𝐓𝐰𝐨 𝐃𝐂𝐅 𝐌𝐨𝐝𝐞𝐥𝐬, 𝐓𝐰𝐨 𝐄𝐜𝐨𝐧𝐨𝐦𝐢𝐜 𝐏𝐞𝐫𝐬𝐩𝐞𝐜𝐭𝐢𝐯𝐞𝐬 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑫𝑪𝑭 This model treats Qualcomm as a private industrial entity, focusing on heavy reinvestment. It explicitly models: ✅ Revenue growth based on historical CAGR ✅ EBIT margin fade toward long‑term averages ✅ Taxes at 25% ✅ Depreciation as a % of revenue ✅ Working capital tied to Revenue ✅ CapEx as a % of revenue ✅ Terminal value linked to long‑run ROIC (12%) This is the framework is typically used by institutional analysts, hedge funds, and private‑equity buyers because it reflects the true reinvestment needs of the business. Intrinsic Value (Operating DCF): $144/share This represents the floor value of the business. 𝑭𝒓𝒆𝒆 𝑪𝒂𝒔𝒉 𝑭𝒍𝒐𝒘 𝑮𝒓𝒐𝒘𝒕𝒉 𝑫𝑪𝑭 This model treats Qualcomm as a public‑market compounder, reflecting its high margin licensing (QTL) business and its future in AI. DCF logic: ✅ Start with current free cash flow ✅ Apply growth based on historical FCF CAGR ✅ Discount at WACC ✅ Add a perpetual terminal value This reflects how public markets value high‑ROIC, capital‑light businesses. Intrinsic Value (FCF‑Growth DCF): $220-259 per share This represents the fair value if the market prices Qualcomm on its cash‑flow compounding ability. 𝑩𝒍𝒆𝒏𝒅𝒆𝒅 𝑽𝒂𝒍𝒖𝒂𝒕𝒊𝒐𝒏 Because the market tends to price semiconductor manufacturing companies conservatively and considering the Apple exit noise, I have weighted the Operating DCF more heavily: ✅ 60% Operating DCF ✅ 40% FCF‑Growth DCF Blended Intrinsic Value: $174-190/share Current Price: $142 Upside: 23-34% 𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐨𝐫 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 I compared Qualcomm’s P/E and P/B ratios to key semiconductor peers including MediaTek, Samsung, Apple, Broadcom, Intel, AMD, Nvidia, and Texas Instruments. Qualcomm trades at 6.6x book value and 28.7x earnings, while delivering an ROE (34%) that is significantly higher than many peers trading at double the multiple. Despite strong profitability metrics, Qualcomm trades at a discount to nearly all major semiconductor peers. This aligns with my DCF analysis, suggesting that the market is pricing Qualcomm conservatively relative to its fundamentals. 𝐅𝐢𝐧𝐚𝐥 𝐕𝐢𝐞𝐰 Based on my analysis, my view is that Qualcomm is currently trading below its intrinsic value, with a meaningful margin of safety. The stock also trades well below the industry average on both P/E and P/B multiples, despite maintaining strong profitability, high returns on capital, and a resilient cash‑flow profile. Taken together, these factors suggest that Qualcomm offers an attractive entry point at current price levels. While the headline risk regarding Apple persists, Qualcomm’s pivot toward Automotive and AI PCs is already filling the gap. By applying a heavy weighting to a conservative reinvestment model, I still see a clear path to $180. I am looking to add this to my portfolio at these levels. The margin of safety is simply too wide to ignore. I’ll continue conducting DCF analyses to identify potentially undervalued assets. If you'd like me to explore another stock, let me know in the comments! All the best, Daniell 📢 Please note this is not investment advice. $QCOM (Qualcomm Inc) $SPX500 $VOO (Vanguard S&P 500 ETF) $INTC (Intel)

Not investment advice. The author may have financial interests in the mentioned instruments.