Stock Story -
What Happened: Shares of wireless chipmaker Qualcomm (NASDAQ:QCOM) jumped 5.4% in the afternoon session after stocks rebounded following Fed Chair Jerome Powell's second day of testimony to the Senate Banking Housing and Urban Affairs Committee. The Nasdaq rose more than 1.5%, while the S&P 500 gained 0.89%. Besides this, we have found no other fundamental or rate-related reasons explaining the improved market sentiments.
The Fed Chair's speech largely reiterated the previous guidance as the FOMC (Federal Open Market Committee) is expected to continue to use data to inform its monetary policy decisions.
The Fed Chair added, "In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks...The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
The Fed Chair also highlighted the possibility of rate cuts this year, which is in line with market expectations, saying, "We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year."
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market. After the initial pop the shares cooled down to $176.05, up 4.8% from previous close.
Is now the time to buy Qualcomm? Find out by reading the original article on StockStory.
What is the market telling us: Qualcomm's shares are somewhat volatile and over the last year have had 6 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 9.3% on the news that the company announced an agreement with Apple (NASDAQ:AAPL) to provide Snapdragon® 5G Modem-RF Systems for smartphone releases in 2024, 2025, and 2026. Qualcomm is the leading supplier of 5G modems, and this deal with Apple further cements its position in the market. Analysts have been concerned that Apple might be increasingly moving towards in-house production of some of its chipsets, which could have hurt Qualcomm's business. However, the deal demonstrated that Apple is still committed to using Qualcomm's modems, which is a positive sign for investors.
Qualcomm is up 25.5% since the beginning of the year. Investors who bought $1,000 worth of Qualcomm's shares 5 years ago would now be looking at an investment worth $3,258.