DCLA’s Sethi: buy this ‘depressed stock’ with a ‘great balance sheet’

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Qualcomm Inc shares (NASDAQ: QCOM) have tanked more than 15% since early February but DCLA’s Sarat Sethi says it’s a high-quality tech stock that will do good in a rising rate environment.

Sethi’s bull case for Qualcomm Inc

Sethi loaded up on Qualcomm shares this morning that speaks to his conviction in this semiconductor name. Explaining why on CNBC’s “Halftime Report”, he said:

To me, Qualcomm is one of these bellwether. Apple’s doing good, semiconductors are doing really well and the demand for 5G is picking up. So, Qualcomm is just a depressed stock with a great balance sheet.

In October 2021, Qualcomm said it will buyback more than $10 billion worth of its stock that adds to the bullish case for the California-headquartered company, Sethi added.

What else is there to like in Qualcomm?

According to the money manager, earnings growth will be the single most important factor that will determine which of the tech stocks will do good in a rising rate environment. Sethi noted:

If you stick with high quality tech companies like Qualcomm, buy them on dips, you’ll be well rewarded going into the earnings seasons. Until you produce cash flow, earnings growth, and show you’re growing through the higher rates period, you won’t get rewarded.

His outlook matches notable Qualcomm bull Jim Lebenthal’s, who says the multiple on this stock should “absolutely” expand.

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