Yesterday, Romit Shah from Nomura downgraded Qualcomm to Neutral from Buy, while also lowering his price target to $60 (from $75). In his report to investors, Shah admits he should have made these changes when some issues related to China surfaced a year ago. These issues were related to the licensing fees charged by Qualcomm to phone makers for using its patents. However, back then Shah expected that just like Qualcomm’s other patent-related disputes, all of which had been resolved in favor of the company, China too would experience a similar outcome favorable to the company. However, he acknowledges his error, noting, “China though has proven to be a different animal.”
Shah believes uncertainties around licensing revenues, which accounts for more than 30% of company’s total revenues, in China are likely to persist. Some of the recent developments suggest that the leadership in China “is not enforcing government-approved licensing terms to current and future licensees of Qualcomm’s technology.”
In conclusion, Shah says he is reducing CY15 and CY16 estimates for the company because of weaker revenues from the Qualcomm Technology Licensing (QTL) division and higher-than-expected opex. For CY16, Shah is currently modelling revenues of $22.4 billion and EPS of $3.8 as opposed to his earlier expectation of revenues of $21.8 billion and EPS of $4.
Romit Shah has a 54% overall success rate recommending stocks with a +7.4% average return per rating. Out of 11 analysts polled by TipRanks who have recently rated Qualcomm’s stock, 6 have rated it as Buy and 5 have rated it as Hold, with none of the analysts expressing any bearish sentiments. The average consensus price target for the stock is $65.95, an upside of 24.57% over current levels.
Priceline Group Inc.
On the same day, Mark Mahaney from RBC Capital reiterated an Outperform rating for Priceline Group after the company released earnings yesterday before market open. However, he’s lowered his price target slightly to $1,700 from his earlier target of $1,725.
Mahaney says total bookings for the quarter of $14.8 billion were in-line with Street and his own expectations. Weaknesses in the domestic market were offset by international strength, and revenues of $3.10 billion slightly exceeded the expectations of both the Street as well as Mahaney.
Mahaney concludes by saying that he’s incrementally less enthusiastic on PCLN, given the greater than expected deceleration in Q3 in International Bookings and Hotel Nights Sold, remarking that the 22% year-over-year growth in Hotel Nights Sold was the lowest PCLN has ever disclosed. Also the 25% year-over-year growth in international bookings, ex-FX, was the lowest since 2009. However, he concludes, “But overall growth trends remain robust, and the Q4 Int’l Bookings growth and margin outlooks are incremental positives.”
Mark Mahaney has a 67% overall success rate recommending stocks with a +22.4% average return per rating. Out of 5 analysts polled by TipRanks who have recently rated the stock, 3 have a Buy rating on Priceline and 2 have given it a Hold rating. None of the analysts have given a Sell rating to the stock. The average consensus price target for the stock is $1,521.67, an upside of 15.20% over current levels.