Qualcomm Inc (NASDAQ:QCOM) shares plunged over 4% today after the company reported generally in-line results but offered significantly worse-than-expected guidance.
Subsequently, FBR Capital analyst Christopher Rolland offered some commentary and insights in a research report released today.
According to Rolland, “Most of the shortfall was due to demand concentration at the high end, including the iPhone that only utilizes Qualcomm’s baseband and Samsung’s GS6/Note 5, which increasingly uses home-grown chipsets. Additionally, management acknowledged a build of 4G Chinese handset inventory that needs to be drained into 4Q15.”
Furthermore, “While we expect QCT operating margins to increase over time, they were just 8% in C2Q15 and are expected to fall to an abysmal 2% to 4% in C3Q15 (we can see aggressive bears calling for negative margins if competition intensifies in 2016). We believe the poor guidance prompted management to implement a significant cost-cutting program, removing $1.4B in operating expenses.”
In reaction, the analyst reiterated a Market Perform rating on Qualcomm stock with a price target of $68, which represents a potential upside of 11% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Christopher Rolland has a total average return of 7.5% and a 57.1% success rate. Rolland has a -2.1% average return when recommending QCOM, and is ranked #626 out of 3713 analysts.
Out of the 35 analysts polled by TipRanks, 22 rate Qualcomm stock a Buy, 12 rate the stock a Hold and 1 recommends Sell. With a return potential of 24.3%, the stock’s consensus target price stands at $76.39.