Brean Capital analyst Mike Burton is weighing in with a few insights on the wireless chip giant QUALCOMM, Inc. (NASDAQ:QCOM) and Singapore-based semiconductor giant Avago Technologies Ltd (NASDAQ:AVGO).
Burton reiterated a Buy rating on Qualcomm shares, while reducing the price target to $70 (from $72), after decreasing estimates. Qualcomm shares are currently trading at $59.07, down $0.84 or 1.40%.
Burton explained, “We are lowering our September and December quarter margin and EPS estimates to account for demand weakness and competitive pressure in the Chinese mobile market. We are reducing our estimates to reflect the weakened environment and increased competition as well as QCOM’s historical propensity to guide its upcoming fiscal year conservatively.”
“We believe MediaTek is gaining share in the China handset market, even as demand has been weak. According to China’s MIIT, handset registrations tailed off in September resulting in 5% quarterly growth in the China market, while MediaTek reported 21% growth in Q3,” the analyst continued.
Furthermore, “We are concerned that Qualcomm has had to compete on pricing at the low end of the market in an already tough demand environment. We expect QCT margins to bottom in the September quarter.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mike Burton has a total average return of 10.8% and a 52.7% success rate. Burton has a -5.0% average return when recommending QCOM, and is ranked #391 out of 3788 analysts.
Out of the 16 analysts polled by TipRanks, 12 rate Qualcomm stock a Buy, while 4 rate the stock a Hold. With a return potential of 21%, the stock’s consensus target price stands at $72.58.
Avago Technologies Ltd
Burton was out pounding the table on Avago Technologies, reiterating a Buy rating and price target of $170, which implies an upside of 45% from current levels. According to TipRanks.com, Burton has a 11.7% average return when recommending AVGO.
Burton noted, “We are updating our pro-forma model for the Broadcom acquisition and adjusting our target multiple as market multiples have compressed. We reiterate our $170 TP based on $11.89 in earnings in CY17 and therefore we believe the stock is incredibly cheap, especially given the combined Company will be a powerhouse in communications semiconductors poised to deliver above-industry growth with best-of-class profitability and free cash flow.”
Out of the 26 analysts polled by TipRanks, 23 rate Avago Technologies stock a Buy, 2 rate the stock a Hold and 1 recommends Sell. With a return potential of 28.7%, the stock’s consensus target price stands at $151.33.