After an epic rally from 2019 to 2021, shares of the mobility chip giant Qualcomm (NASDAQ: QCOM) haven’t been doing so well lately. After another massive sell-off in the market (thanks to inflation), Qualcomm stock is again close to its 52-week low and down more than 30% from its all-time high for the year last.

It is now the third time in a year that Qualcomm has fallen to this level – and this time it is trading for a measly 11x 12-month earnings per share. As the company prepares to break into new markets, this is another chance to stock up on this top-notch chip stock on the cheap.

All eyes are on the smartphone market, but should they be?

The reason why Qualcomm is being punished again has to do with the smartphone industry. After a solid two-year period fueled by consumer spending at the start of the pandemic and an initial wave of 5G-enabled phones, global smartphone sales are in trouble. Qualcomm still expects its revenue to grow anyway, as its phone content continues to grow thanks to 5G. Moreover, its Internet of Things (IoT) and automotive segments are also in growth mode at the moment.

Qualcomm has plenty of new developments on the way though, like personal computer chips, virtual reality processors, and even data center and server hardware. As for the latter end market, rumors in recent weeks suggest that Qualcomm may be planning a return to the cloud (it left the data center market about four years ago), using ARM’s designs through its acquisition of the start-up Nuvia last time. year. In reality, Amazonit is (NASDAQ: AMZN) The cloud computing segment, AWS, has expressed interest in testing Qualcomm’s new offerings.

The data center and server market is huge, and now could be the perfect time to jump in. Long-time leader in this space Intel (NASDAQ: INTC) ceded market share to AMD (NASDAQ: AMD) and Nvidia (NASDAQ: NVDA) for years, and even the CEO of Intel has admitted that it will likely continue to lose market share over the next two years. So why not Qualcomm too, if there are fruits at hand in cloud infrastructure and computing chips?

But the question is: will it work? There’s a chance it could. Qualcomm’s bread-and-butter chips for smartphones are a fantastic marvel of engineering. They are powerful, but also ultra-compact, energy efficient and specially designed for a connected mobile world. If this same technology could be extended to also encompass data centers, personal computers, etc., Qualcomm could move from being a smartphone specialist to an all-computing generalist.

All this to say that the market as a whole is hyper-focused on the near-term outlook for Qualcomm’s smartphone sales, but it’s missing the forest for the trees. There is much more to the business than in the past, and it sets the stage for many years of expansion. So, another chance to buy again near the 52-week lows after recent weeks’ sharp selling could be a wonderful long-term gift for investors.

But what about free cash flow?

Of course, using earnings per share, Qualcomm’s stock looks very cheap. However, on a free cash flow basis, the shares are trading for an enterprise value well over 23 times free cash flow. Which give?

Free cash flow can be erratic, not just from quarter to quarter, but even from year to year. Why? Developing new chips costs money, often requiring large sums of money before sales start rolling in. And that’s exactly what Qualcomm is doing these days. Its engine of innovation has accelerated and could be on its way to paying off in the next year or two as spending that strains free cash flow begins to pay off.

It all hinges on whether Qualcomm’s developments for laptops, virtual reality, data centers and automobiles actually appeal to customers. But with so many irons in the fire and a proven range of chip technologies, I like the company’s chances of expanding beyond smartphones in at least one, if not more, new directions. I think the market continues to sell Qualcomm’s long-term outlook in the short term. If you haven’t bought yet, this latest sale looks like a fantastic buying opportunity.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Nicholas Rossolillo and his clients hold positions at Advanced Micro Devices, Amazon, Nvidia and Qualcomm. The Motley Fool holds positions and recommends Advanced Micro Devices, Amazon, Intel, Nvidia and Qualcomm. The Motley Fool recommends the following options: $57.50 long calls on Intel in January 2023 and $57.50 short puts on Intel in January 2023. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.