Qualcomm (QCOM): Good News Is Already Priced Into the Stock, Says Analyst


The market has divided itself into two camps. The bulls argue that the worst is behind Qualcomm (QCOM) after the chip giant failed in its long-running attempt to take out NXP Semiconductors. The bears argue that the market is too optimistic about Qualcomm’s future and there’s only one way the stock can go — down. KeyBanc analyst John Vinh has found himself in the middle.

Vinh initiated coverage on Qualcomm shares with a Sector Weight rating, without providing a price target. (To watch Vinh’s track record, click here)

Vinh opined, “Fundamentally, we can’t see much else that can go wrong for QCOM at this point given it is: 1) in a license dispute with what was previously its largest customer, Apple; 2) losing all of its modem market share in the new iPhones (XS and XR); and 3) engaged in a licenses dispute with one of the largest Chinese OEMs (Huawei). Resolving any of these issues would be a meaningful catalyst for the stock, in our view. Current guidance for FY19 projects $5.25 in EPS without any licensee resolution. QCOM anticipates that a licensing resolution would add $1.50-$2.25 in EPS, resulting in aggregate EPS of $6.75-7.50.”

“Despite the disappointment associated with the NXPI deal not going through, we see limited downside risk and see benefits arising from the $30B stock repurchase, a potential settlement with Apple and Huawei, and the opportunity to regain share during 5G. However, we believe these expectations are increasingly being priced into the stock and view risk/reward on the stock as balanced at current levels,” the analyst continued.

Overall, Wall Street sizes up QCOM as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the semiconductor titan. In the last 3 months, Qualcomm stock has received 10 bullish ratings versus 5 analysts hedging their bets, and one bear who thinks the stock price could plunge. Yet, the 12-month average price target remains flat at $73.31. (See QCOM’s price targets and analyst ratings on TipRanks

 

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