<p>Do you remember when investors were focused on whether the 5G revolution would live up to its reality? Yes, I do too. And Qualcomm (NASDAQ: QCOM) certainly wants the only question investors would ask is whether the Qualcomm stock was overvalued at $ 88 per share.
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In early March, Piper Sandler’s analyst Harsh Kumar began covering Qualcomm shares. At the time (just two weeks ago), he gave the stock a “neutral” rating with a price target of about $ 80, but was bearish on the stock.
His expectation was that Qualcomm’s share price seemed to have taken proper account of the growth it would receive from 5G smartphone sales.
I still believe that 5G will set up Qualcomm shares for some healthy gains. However, the stock will probably have to fall further before that happens.
What a difference a month makes
One month ago, the market reached new highs almost every day. Today, investors are scared. Companies are closing or will close. Consumers are or will be unemployed for reasons that have nothing to do with a normal business cycle.
The market sells everything, at any price that stands in the way of that story.
And Qualcomm has been no exception. From the time the market closed on Friday, March 13 to the time the market closed on Wednesday, March 18, the Qualcomm share has fallen over 20%. It takes the total loss for 2020 to over 34%.
Qualcomm shares may fall further
Right now, Qualcomm’s stock is a falling knife. And if history is a lesson, there can be a little more pain. During the 18 months that covered the dot-com bubble bursting through the events of September 11, 2001, Qualcomm fell from a price approaching $ 100 per share to below $ 13.
It took the stock over five years to get back over $ 50 per share.
Then the financial crisis took down the shares. But at that point, Qualcomm found its footing at about $ 33 a share.
So the question is how far will the Qualcomm share fall? And until the market provides more clarity on that issue, it is probably best to stay away.
Misery loves company
In times like these, it is important for investors to take a step back and look at the bigger picture. And when we do, we see that the entire semiconductor sector is under pressure.
As Chris Lau of InvestorPlace recently wrote, semiconductor stocks are usually the first to fall sharply. To this end, the PHLX Semiconductor index is down over 35% for 2020. This means that Qualcomm has not fallen any more or less than other semiconductor stocks.
This is not to try to pretend that this is not a time for concern. But investors need to understand that as bad as things are, there will be a time when the market will stabilize. And when it does, there will still be a demand for 5G technology and the products derived from it.
When should investors buy Qualcomm shares?
Like many of you, I try to stay informed, but pay attention to the quality of the information I consume. Some of the strongest economic brains I follow say that the market may continue to slide until there is better news about a breakthrough in the treatment of coronavirus from China.
Unfortunately, it looks like it will take a while in the future.
Investors have to make their own decisions, but right now Qualcomm is offering an annual dividend of $ 2.48 – and that recently increased the payout. While it may not be a reason to jump on the stock right now, it may give you a reason to make sure the stock is on your watch list.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. At the time of writing, Chris had no position in any of the above securities.