Qualcomm (QCOM) Stock Is a Buy at These Levels, Says 5-Star Analyst
Deutsche Bank’s Ross Seymore has been reviewing the impact of COVID-19 on the semiconductor industry, and it has become apparent that due to supply chain disruption and “eventual demand delay and destruction,” the sector as a whole will suffer in the near to mid-term. There are certain companies, though, that following the downturn, currently “yield an attractive risk/reward.” Qualcomm (QCOM) is among those.
Qualcomm was one of the first companies to warn of the impending impact of the coronavirus. When in early February the chip giant widened the range of its EPS guidance due to the viral outbreak in China, the news spooked investors and triggered a sell off. Nonetheless, the 5-star analyst upgraded Qualcomm shares from Hold to Buy, while lowering the price target to $85 (from $96). Gains in the shape of 29% could be lining investors’ pockets should the price target be achieved in the next 12 months. (To watch Seymore’s track record, click here)
To back up his positive thesis for Qualcomm, Seymore cites a favorable set of metrics that include 5G product cycles, China FIFO (first in first out) exposure and a healthy balance sheet and dividend yield. Although the macro elements on account of COVID-19’s impact on supply and demand necessitate a constant rethinking of revenue and EPS.
Seymore said, “We expect QCOM’s strong competitive positioning in 5G handsets (modems, RF, content, Apple share etc.) will allow it to weather this storm better than most and rapidly benefit once economic conditions normalize. To capture near-term headwinds, we are reducing our estimates on QCOM for the second time this month (last on 3/8/20), with our F2Q (March) rev/EPS ests at the low end of QCOM’s guided range (DBe rev/EPS at $4.9b/$0.80, ~5%/8% below consensus), F3Q falling to ~$4.8b/ $0.75 (~9%/13% below consensus) and F4Q contemplating a later 5G iPhone cycle (DBe $5.5b/$0.94, ~15/30% below consensus).”
The rest of Wall Street largely buys into what this chip player has to offer, as TipRanks analytics reveal QCOM as a Buy. Out of 19 analysts polled in the last 3 months, 11 are bullish on Qualcomm stock while 8 remain sidelined. With a return potential of 41%, the stock’s consensus target price stands at $93.06. (See Qualcomm stock analysis on TipRanks)