The expectations are sky-high for Qualcomm (NASDAQ:QCOM) and other artificial intelligence hardware manufacturers in 2024. Since the prevailing sentiment surrounding Qualcomm is highly optimistic, contrarian investors shouldn’t be too eager to buy Qualcomm stock now.
InvestorsPlace contributor Chris MacDonald reported on the analyst community’s highly ambitious projections for Qualcomm. At the same time, the CEO’s share sale seems to tell a different tale. In addition, a well-known tech-gadget manufacturer’s addition of AI features could put a dent in Qualcomm’s future top-line results.
Qualcomm’s Apple Problem
As InvestorPlace contributor Larry Ramer explained, Apple (NASDAQ:AAPL) is preparing to roll out Apple Intelligence, which includes AI features for some of the company’s products.
Owners of the “iPhone 15 Pro and 15 Pro Max, as well as iPads and Macs with M1 or newer chips” can look forward to AI-powered features as soon as this fall.
Apple’s loyal customers could quickly get used to these AI features. Consequently, Apple’s market share for smartphones and other tech gadgets might grow this year and next year.
That’s potentially bad news for Qualcomm, which reportedly derives “most” of its revenue from Android devices. Ramer observed that Qualcomm “benefited last quarter from strong sales of AI-capable Android devices.”
So, investors should be concerned about Apple taking market share from Android devices and thereby diverting an important revenue source from Qualcomm.
Chipmaker Chiefs Are Selling Their Shares
A recent report from Barron’s found a pattern that should make overeager Qualcomm investors think twice. In particular, multiple chipmaker chief executives have sold large numbers of their company’s shares.
The report identified four CEOs and the quantities of their companies’ shares that they sold:
- Nvidia (NASDAQ:NVDA) CEO Jensen Huang sold 720,000 shares.
- Micron Technology (NASDAQ:MU) CEO Sanjay Mehrotra sold 457,280 shares.
- Coherent (NYSE:COHR) CEO Vincent “Chuck” D. Mattera Jr. sold 15,000 shares and “expects to sell up to 65,000 Coherent shares, and use stock options to acquire and sell up to another 128,620 shares through the end of 2024.”
- Qualcomm CEO Cristiano Amon sold 40,500 shares.
Do these chief executives know something that most retail stock traders don’t? Do they expect imminent share-price drawdowns?
These are valid questions in light of the CEO’s share sales – and in light of Qualcomm’s elevated valuation. Qualcomm has a trailing 12-month price-to-sales ratio of around 6x, and that’s quite high. In fact, it’s double the sector median P/S ratio of around 3x.
Qualcomm Stock: Only Buy It at This Price
With at least four chipmaker chiefs selling shares of their companies, this isn’t just a fluke. It’s a pattern that should raise eyebrows and raise concerns among Qualcomm’s loyal shareholders.
Plus, the introduction of Apple Intelligence could negatively impact Qualcomm’s top-line stats in the upcoming quarters. Hence, since Qualcomm’s valuation is elevated, stock traders should wait for lower price points.
Previously, I recommended only buying Qualcomm stock at $150 or less. I won’t win any popularity contests for this, but I’m sticking to my $150 buy-price suggestion. You’ll thank me when the Qualcomm share price gets there, as the buying opportunity will be hard to resist at that point.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
