A couple of months ago we published this must-read investing tip: 2 Chart Patterns That Investors Should Recognize. In there Qualcomm was featured. At that time Qualcomm was trading around $50. We said a breakout was in the making. At the moment of writing Qualcomm trades exactly 50 pct higher. How much upside potential is there? This is our Qualcomm stock forecast for 2019.
Ed. note on April 20th 2019: Qualcomm rose 40 pct this week. This is highly unusual for a company with a $90B market cap. CNBC made this point by listing all large cap stocks with +20% rises on a single day. Scroll down to the bottom of this article to read what’s going on, and whether our Qualcomm stock forecast for 2019 is impacted.
Qualcomm price forecast: a bullish breakout in the making
Kudos to our researcher Ralf Lai who came up with Qualcomm’s long term chart on which he identified this long term consolidation pattern. As with any pattern it is all about understanding the dominant trend, and, with it, when it gets invalidated. As long as stock or market trades within its primary trend (pattern) it will continue to do so. Sounds simple, but not easy for investors to stay disciplined on this rule.
In order to calculate our Qualcomm stock forecast for 2019 we need to consider the details on the long term pattern.
The long term consolidation pattern is one of our favorites. The saying goes ‘the longer the base the higher space’, and this really an important insight. The longer a consolidation lasts the more upside potential it develops.
During Qualcomm’s consolidation phase many investors lost faith and sold as the returns were not interesting enough compared to many other stocks. With every drop there is more sellers that leave.
That’s how it went with Qualcomm as well. Once all sellers left, the really good news resulted in explosive price action because there are hardly any sellers left.
This is what we wrote in our article in May:
Recently the stock price of Qualcomm experienced an exodus of confidence due to blocking of Broadcom’s intention to acquire Qualcomm. Be that as it may, Qualcomm experienced a formidable run from 1992 till 2000. Since then price has been consolidating into a triangle for the past 18 years or so. As long as the price does not break below 48, we consider Qualcomm in a consolidation phase.
As seen on the weekly chart Qualcomm was trading at $50. The long term moving average was flat. Why would anyone buy this stock with the bad news that we mentioned above?
The answer to that question is to be found in major news that Qualcomm published end of July of this year, this CNBC article explains what it is about:
Qualcomm will begin repurchasing up to $10 billion of its shares. The share repurchase would be a “modified Dutch auction,” a process that allows shareholders to declare the number of and price at which they sell their shares. The buyback move comes after Qualcomm announced plans during its third-quarter earnings call to repurchase as much as $30 billion in stock.
This news was the catalyst for what we saw coming when we wrote this in May:
Qualcomm’s price could consolidate a little more before attempting to breach the resistance zone of 70. If the breakout is successful then it will likely break above the triangle downtrend line of 75-77 before challenging 82 as a major breakout point! Once above 82 we talk about a major or secular breakout.
So that is a textbook example of just 1% of the news that really matters! Remember, Tsaklanos his 1/99 Investing Principles, one of things they suggest is that 99% of news is meaningless to investors.
We will use this information to determine a Qualcomm price forecast for 2019, read on.
Qualcomm price forecast 2019
The long term trend of any stock or asset or market is what drives future price movement. It is also the basis for our Qualcomm stock forecast for 2019!
The long term trend is visible on this chart. How high can Qualcomm’s price rise in 2019?
Based on our simple calculation of the $30B share buy back program we derive a price target of $80. That’s because the share buyback was announced end of July when the stock was trading at $62 per share and market cap of $91.7B. The $30B share buyback would add 30% of the market value to the company which is how we get to the $80 price target.
However, that is just the impact of the share buyback, it does not include any other parameter. When looking at the stable revenue growth, but, more importantly, rising trend in profits, as seen here, it is clear that this effect should not be excluded. Moreover, recent earnings show that Qualcomm consistently beats expectations, so there is this effect that must be accounted for in forecasting a future price target.
Together with the bullish power that comes with the breakout out of the 18-year consolidation pattern we are on record with a Qualcomm price forecast for 2019 of $95 to $100.
The flipside, say bearish scenario, is when something unexpected would take place that drives Qualcomm back below its breakout point at $66.
This is just one of the many market forecasts for 2019 that we have published, and continue to publish!
** Update on April 20th, 2019 **
Major news sent Qualcomm’s stock price 40% higher
Reuters reported the reason for the major move in Qualcomm’s stock price:
In the end, Apple and Qualcomm ceased all litigation, with Apple signing a six-year licensing deal with Qualcomm and also agreeing to buy Qualcomm chips. Hours later, Intel said it was getting out of the modem chip business.
Apple’s only current modem supplier, Intel, said that it would not have a 5G chip ready until 2020, which could have pushed Apple’s launch of a 5G iPhone into 2021 – a long enough delay that it could hurt sales. Qualcomm, on the other hand, is preparing to ship its second generation 5G chip and can meet Apple’s needs with its current products.
CNBC confirmed this news.
In fact, it’s all about 5G. And Qualcomm seems to be one of the prominent players in the 5G market. The expectation is that 5G will start becoming mainstream in 2020. So this is rightfully one of the top investing opportunities of 2019 and 2020.
It was pretty tough to find numbers on the deal and market opportunity. So we are not really able to quantify how this deal and news may impact our already existing Qualcomm stock forecast of $100.
For now we stick to our $100 Qualcomm stock forecast.
The Qualcomm stock charts look awesome
In a typical top down approach we start with the monthly chart.
The breakdown that we spotted 7 months ago when we originally published our Qualcomm forecast got invalidated soon after. The stock hit secular support, and tested it successfully in December/January.
The breakout of April of 2019 looks to be the ‘real deal’. The monthly chart shows why. This is a convincing breakout, without any doubt!
The weekly timeframe has a new and potentially very valuable insight. There is a new channel. We marked this in green on the next chart.
If this channel is the new dominant trend it suggests Qualcomm will hit $100, maybe not yet in 2019 but certainly in 2020. So it is another confirmation of our $100 price target!
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