Morgan Stanley analyst James Faucette is out with a research report on QUALCOMM, Inc. (NASDAQ:QCOM), reiterating an Overweight rating with a $65 price target, marking just under a 5% upside from where the stock is currently trading.

After revisiting his earnings power analysis to evaluate industry developments, Faucette reduces his peak earnings estimate to $6.28 from $6.54, driven primarily by iPhone share loss and reduced contribution from winning the Samsung flagship designs. The analyst noted, “QCT margin improvement remains the largest driver for realizing earnings potential outside of share repurchase activity.”

The analyst raises Q4 expectations, now expecting $7.8 billion in QTL revenue for the fiscal year of 2016, which hits the upper end of management’s guidance, which the analyst views as a reflection of the vivo and OPPO agreements.  Moving forward, Faucette anticipates improved royalty capture, with EPS estimate for FY16 of $23.5 billion/$4.32 and for FY17 of $23.8 billion/$4.72.

Faucette comments, “With China compliance issues mostly resolved, continued earnings growth should be realized through share gains in the handset market and margin improvements despite potential share loss to INTC in the Apple baseband business. We continue to believe incremental markets (like automotive) will be unlikely to add or preserve value for many years to come and handset replacement cycles remain the primary variable for peak earnings.”

According to TipRanks, James Faucette is ranked #429 out of 4,124 analysts. Faucette upholds a high 75% success rate and realizes 8.0% in his annual returns. When recommending QCOM, Faucette earns 12% in average profits on the stock.

TipRanks analytics exhibit QCOM as a Buy. Based on 19 analysts polled in the last 3 months, 10 rate a Buy on QCOM, 8 maintain a Hold, and 1 issues a Sell. The 12-month average price target stands at $62.31.

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Morgan Stanley Revisits QUALCOMM, Inc. (QCOM) Earnings Power Analysis