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The Ratings Game: Qualcomm stock heads for best day in months as Wall Street applauds smartphone strength, but shows some caution

Qualcomm Inc. shares rallied Thursday as analysts acknowledged the chip maker managed to sidestep concerns about a slowdown in the China’s smartphone market and back up a bullish forecast going forward.

Qualcomm
QCOM,
+8.13%

shares rallied as much as 9% Thursday to an intraday high of $147, even as most Wall Street analysts trimmed their target prices. Of the 32 analysts who cover Qualcomm, 22 have buy-grade ratings and 10 have hold-grade ratings. Of those, two raised their price targets while 13 lowered theirs, resulting in an average target price of $207.45 down from a previous $223.69.

Late Wednesday, Qualcomm’s quarterly results and outlook topped Wall Street expectations not only on strong growth from emerging businesses like its Internet-of-Things products but from its core handset chip business. Underpinning strength in the handset business was Qualcomm’s assertion that handset makers like Samsung Electronics Co.
005930,
-0.31%

were not only using Qualcomm’s Snapdragon chip over an internally developed one for their high-end Galaxy S22 phone but were advertising use of the Snapdragon.

While Qualcomm shares rallied Thursday, analysts, however, put the bullish sentiment in perspective, noting it could be a nearer rather than longer term.

While acknowledging Qualcomm’s near-term progress, Rollard held to his rating and price target based on Apple Inc.’s
AAPL,
+4.17%

internal modem and RF efforts “and an increasingly cloudy macro outlook.”

Cowen analyst Matthew Ramsay, who has an outperform rating and a $220 price target, also addressed the Apple question. Ramsay’s check indicate an internally developed Apple modem in the company’s 2024 iPhones rather than in 2023, putting Qualcomm’s annual earnings-per-share above $15 before flattening out in 2025 as earnings absorbed the loss of Apple business.

Evercore ISI analyst C.J. Muse, who has an in-line rating and a $150 price target, said he worried “about improving supply dynamics and rising competition in the handset business, and the implications of these dynamics for pricing.”

“Given our expectations for earnings to peak in 2022 and a vision for earnings to decelerate into 2024, we see better upside elsewhere and reiterate our In Line rating and $150 price target,” Muse said.

Bernstein analyst Stacy Rasgon, who has an outperform rating and a $200 price target, said Qualcomm’s primary bear case “is likely to simply be whether this is as good as it can get, and whether investors will now have to think about ‘peak Samsung’ as well as ‘peak Apple.’”

“Fundamentally it is hard to see how things could be going better for the company right now, as they continue to deliver massive upside even amidst a market that is currently creating significant angst to investors, with content, share, and diversification all helping to insulate them, and new Samsung Galaxy wins (which appear to be a major part of the positive June-Q revision) adding to the story,” Rasgon said.

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