Despite the company facing significant cyclical headwinds impacting its performance in fiscal Q3 and beyond, Qualcomm Incorporated (NASDAQ: QCOM) maintains its buy rating in my analysis. Early signs of a recovery, increased investments, and normalization of inventories indicated by the Q2 shipment data may lead to increased demand for Qualcomm products.

Qualcomm remains in excellent shape, given its strong market positions in the smartphone, IoT chip, and automotive semiconductor markets. With a 30% market share in smartphones, the company is well-positioned to benefit from the predicted 7.3% CAGR growth in the industry through 2029. Moreover, Qualcomm holds a 38% market share in IoT chips and an 80% market share in the automotive connectivity market.

The risks associated with Qualcomm’s significant exposure to China and the potential loss of Apple as a customer are acknowledged, posing challenges that require a discounted valuation. Nevertheless, the company is believed to be trading around fair value and could potentially report a relatively strong Q3 result and Q4 guidance.

The healthy financials of Qualcomm, including strong margins and return on equity, allow the company to generate solid cash flows and return cash to shareholders through dividends and share repurchases. Furthermore, Qualcomm’s efforts in AI, its exposure to China and Big Tech, and the latest developments and financial results update the revenue and EPS estimates.

Considering the potential for a slight recovery in demand, solid market positioning, and long-term growth prospects, I have set a target price of $148 for Qualcomm’s shares, implying an upside of approximately 14%. My advice to investors is to look beyond the near-term headwinds and focus on the company’s long-term potential. With the current share price at $130, the buy rating on Qualcomm Incorporated is maintained in my opinion.