Top Analyst Cuts Price Target on Qualcomm (QCOM); Keeps His ‘Buy’ Rating Intact
Qualcomm (QCOM) is the world's largest producer of smartphone semiconductors and modems. Although significantly smaller than the all-conquering giant from Cupertino, there are recent similarities between the two. Like Apple, QCOM was a gain machine in 2019, and recently notched an all-time high. Along with the broader market, the share price has retreated since - by a depressing 32%.
And just like Apple, it has a lot of business in China. Qualcomm had already warned investors back in February that the global mobile market was to take a hit due to the virus’s impact.
Walkley has been calculating the costs, too, and subsequently lowered 2020 worldwide smartphone sales estimates from 1.79 billion to 1.48 billion. The June quarter estimates have been bought down, too; from 404 million to 323 million units. Though, as with Apple, Walkley remains positive. “While our estimate reductions could prove conservative, we believe investors will eventually look through the near-term supply and demand shock and focus on C2021 earnings potential,” he added.
While Walkley acknowledges it is hard to determine the long-term repercussions on smartphone demand, the 5-star analyst projects the weak sales in June will be followed by “steadily improving trends in 2H/C20.”
Looking further ahead, for C2021, Walkley projects global smartphone sales of 1.7 billion units as opposed to his previous estimate of 1.85 billion units. This upgraded forecast brings sales back to 2017 levels, which Walkley hopes “proves conservative”
Walkley concluded, “Qualcomm has a strong leadership position for 5G that we believe should not only result in strong share gains with leading smartphone OEMs but also provide an opportunity of up to 1.5x the dollar content of a similar 4G customer smartphone due to a combination of increased RF content and higher pricing for 5G basebands versus premium-tier 4G solutions… While 5G could drive a strong upgrade cycle with a more V-shaped recovery demand than our estimates, we believe Qualcomm’s share price has priced in a much worse recovery than our lowered estimates.”
Walkley reiterates a BUY rating on Qualcomm, but reduces the price target from $115 to $95. The new figure still implies upside of 47.5%.
Where does the Street stand regarding the semi-conductor giant? 10 Buys and 8 Holds add up to a Moderate Buy consensus rating. The average price target is just under Walkley’s revised figure, and at $94.67, implies potential upside of 46%. (See Qualcomm stock analysis on TipRanks)
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