QUALCOMM, Inc. (QCOM): Future Won’t Be That Much Better Than Recent Past, Warns Edward Snyder

Charter Equity's Edward F. Snyder doles out a cautious take on the chip giant ahead of discussions to buy out Broadcom.


QUALCOMM, Inc. (NASDAQ:QCOM) rejected once more Broadcom’s upped ante- an expensive $82 per share bid for what would be the biggest takeover on record in the tech-verse. As the chip giant sorts out cash logistics in a prospective whopping $121 billion deal to take the Broadcom bite, one sidelined analyst is shedding light.

Charter Equity analyst Edward F. Snyder says all eyes will be on the board election come March 6th, which could swing the future of a Broadcom acquisition in Qualcomm’s favor.

Worthy of note, Snyder is bullish on Broadcom for leading the pace against every other large-cap semiconductor rival in the arena. This is a company that has sustained robust shareholder returns, all while achieving or beating out Street-wide expectations.

Yet, the same cannot be said for Qualcomm, Snyder points out. Though when 4G was first deployed, Qualcomm earned massive gains from price appreciation thanks to a “virtual monopoly” in LTE basebands, tides have changed.

The analyst writes, “By contrast, returns for QCOM have not kept pace and, in fact, have trailed nearly all other large cap semiconductor companies since 2013 […] with so much of its earnings power tied to licensing revenue, profits and margins took a hit after the Chinese licensing settlement in 2015 slashed blended royalty rates and device ASPs. That lead to a period of underperformance to consensus which was falling below industry averages in 2013 and 2014.”

Moreover, “We believe that with revenue so heavily tied to the mobile phone market and profits so strongly dependent on licensing, QCOM’s future will not be materially better than its recent past, even if 5G occurs as management projects. Because the growth benefits of vertical markets decline as the industry matures and competitors catch up, early 4G wins at Apple and Samsung are now downside risks as Intel and LSI (Samsung’s internal ASIC) take share,” contends Snyder.

As such, the analyst reiterates a Market Perform rating on QCOM stock without listing a price target. (To watch Snyder’s track record, click here)

TipRanks showcases a largely bullish analyst consensus betting on the chip giant’s market opportunity. Out of 12 analysts polled in the last 3 months, 8 rate a Buy on Qualcomm stock while 4 maintain a Hold. Notably, the 12-month average price target of $96.82 suggests a healthy return potential of 48% from where the stock is currently trading.