Is QUALCOMM Incorporated (QCOM) the best cheap growth stock to buy according to analysts?

According to analysts, we recently compiled a list of 8 cheap growth stocks worth buying. In this article, we’ll take a look at where analysts think QUALCOMM Incorporated ( NASDAQ:QCOM ) ranks among cheap growth stocks worth buying.

Why is the market still volatile after interest rate cuts?

When the Federal Reserve lowered interest rates last week, there was a general expectation that the market would rise. However, this did not happen. Tom Lee, managing partner of Fundstrat Global Advisors and head of research, recently joined CNBC for an interview to talk about why the market is not performing as expected. The Federal Reserve has initiated a cycle of monetary easing in the market, which is expected to have a positive impact. Tom Lee believes that historically the market is positive if we look at the situation 3 or 6 months from now. However, the market behavior for the next 40 days is a coin toss.

The two reasons for this volatility are: first, there has been some repositioning in the market as a result of interest rate cuts, and second, the market is now entering the 40-day election period. Tomek believes that the positive effect that the interest rate cut was supposed to bring has not disappeared, but will be postponed until after the elections. Talking about his personal experiences at various conferences and meetings, he believes that a significant part of society does not want to commit capital before the elections. Moreover, it doesn’t matter who wins, but the public just wants to have Election Day in the rearview mirror before they take over the capital.

We recently wrote about an article about 7 cheap blue chip stocks worth investing in nowwhere we talked about how the S&P 500 index has become overcrowded with technology companies and has lost some of its diversity. Here is a fragment of the article:

“Coming back to how investors might reconsider their idea of the S&P as a low-risk investment. This idea was introduced by Bill Nygren, chief investment officer at Oakmark Funds, in a recent interview with CNBC. His approach reflects a strategic shift in the way investors may view the S&P 500 and megacap stocks in the current market environment. He emphasized that although it is traditionally perceived as a diversified index, in reality it is only a bet on a few large technology companies. Currently, about half of the S&P 500 index is dominated by about 25 large technology companies, which substantially reduces its original diversification. Bill Nygren stressed the importance of having a more diversified portfolio beyond large-cap stocks. He believes that portfolio diversification provides better risk-adjusted returns compared to relying solely on a few large companies. We also featured Matt Stucky, principal equity portfolio manager of Northwestern Mutual Wealth Management, talking about a similar strategy in The 13 Most Undervalued Blue Chip Stocks That Are Worth Buying, According to Analysts. The investment strategy vouched for by Nygren suggests that the current market scenario, in which investors favor stocks of companies with positive momentum, may lead to missed opportunities in other undervalued sectors such as financial and energy. He believes the potential lucrativeness of the tech sector has overflowed the space, creating opportunities in other sectors.

Lee also supports the view that the S&P 500 is a bet on the technology sector. He believes that if the technology sector does not return to its leading position and collapses, it will be difficult for the rest of the companies to survive.

Lee is a fan of small-cap stocks and closely studies the Russell 2000. He admits the index is slow, but the basic investment case for small-caps remains the same. Lee believes the bottoms of the year are not always immediately high and the likelihood of the market hitting record highs next year remains high. His investment thesis is: buy the dip if the market falls on Election Day, because the current market environment ensures that a positive effect is just around the corner.

Our methodology

To compile a list of 8 cheap growth stocks that analysts think are worth buying, we used Finviz’s stock screener to aggregate a preliminary list of stocks. We looked for cheap stocks in a variety of emerging industries, including technology, healthcare, biotech, and telecommunications, among others. Our criteria for “cheap” is the stock trading below a forward price-to-earnings ratio of 23.98 (Wall Street Journal forward market P/E) and expected earnings growth within a year. Using these criteria, we created a list of 20 cheap growth stocks and then ranked them according to their growth potential, sourced from CNN. The list is ranked in ascending order by analyst growth potential.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the best stocks of the best hedge funds. As part of our quarterly newsletter strategy, we select 14 small- and large-cap stocks every quarter, and since May 2014, we have returned 275%, beating our benchmark by 150 percentage points (see more details here).

QUALCOMM Incorporated (NASDAQ:QCOM)

Forward P/E ratio: 16.53

Profit growth this year: 19.60%

Analyst growth potential: 27.28%

While investors focused on the potential of AI servers, they may have overlooked the potential of AI in smartphones. QUALCOMM Incorporated (NASDAQ:QCOM) is capitalizing on the production of AI-enabled chips for smartphones. It is an international corporation that develops integrated circuits and software for devices of various technologies. It makes a significant contribution to enabling phones to connect to 4G and 5G technology.

Apple recently launched its first AI-enabled iPhone with the help of the Snapdragon 8 Gen 3 chip from QUALCOMM Incorporated (NASDAQ:QCOM). Although the iPhone maker intends to move away from QUALCOMM. However, they extended the patent license agreement until the first quarter of 2027, indicating the company’s importance in the smartphone industry.

Moreover, on September 24, Reuters reported that QUALCOMM Incorporated (NASDAQ:QCOM) approached Intel with a potential buyout proposal. If this happens, it will not only be one of the largest mergers and acquisitions in the industry, but will also result in the introduction of a number of new products. The unification of Snapdragon chips with Intel chips for PCs and servers will create a semiconductor powerhouse.

The company recently released its fiscal third-quarter results, showing revenue of $9.4 billion, near the high end of guidance. Revenue growth was driven by strong overall performance, with QCT and QTL segment revenues increasing 12% and 3%, respectively, year over year.

According to analysts, QUALCOMM Incorporated ( NASDAQ:QCOM ) is one of our cheap growth stocks to buy. The company is trading at a 31% discount to its sector and earnings are expected to grow 19.6% over the year.

O’keefe Stevens Advisory stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:

“This quarter, the AI rally has expanded beyond the obvious players from Nvidia, AMD and hyperscalers. QUALCOMM company registered (NASDAQ:QCOM), a multi-year investment, is gaining recognition for integrating artificial intelligence into mobile phones. Qualcomm’s AI capabilities on devices enable real-time language translation, enhanced voice recognition and advanced imaging techniques as AI becomes more integral to mobile experiences. Qualcomm benefits from being a market leader in delivering robust, efficient and comprehensive AI solutions. “Artificial intelligence could be the first technological development in several years that will speed up the smartphone replacement cycle as users crave these advanced features.”

QCOM in general ranks 6th according to analysts, it’s on our list of cheap growth stocks to buy. While we see QCOM’s growth potential, we believe AI stock has a better chance of delivering higher returns, and in a shorter period of time. If you’re looking for promising AI stocks that are trading at less than 5 times their earnings, check out our report on cheapest AI stocks.

READ MORE: $30 Trillion Opportunity: Morgan Stanley’s 15 Best Humanoid Robot Stocks to Buy AND Jim Cramer says NVIDIA has “become a wasteland”.

Disclosure. Nothing. This article was originally published on Insider Monkey.