Is Qualcomm (QCOM) About to Underperform FQ2:18 Expectations? Top Analyst Weighs In

Though RBC Capital's Amit Daryanani remains quite bullish on QCOM, he cuts his 12-month target expectations by $5, now expecting 48% in return potential.

As Qualcomm (NASDAQ:QCOM) gears up to deliver its second fiscal quarter print for 2018 tomorrow evening, a bull on the Street is bracing for a warning: some downside lies ahead for this chip giant. Top analyst Amit Daryanani at RBC Capital keeps a wary eye on Apple iPhone channel inventory and a soft China smartphone market.

That said, Daryanani still spotlights share drivers in his line of vision for QCOM and continues to back the bulls. In his earnings preview, the analyst maintains an Outperform rating on QCOM stock while cutting the price target from $80 to $75, which implies a 48% upside from current levels.

Though the Street is angling for $5.19 billion in sales for the second fiscal quarter and $0.70 in EPS, Daryanani stands a bit under these expectations, looking for $5.11 billion in sales and $0.69 in EPS. For the third fiscal quarter, Daryanani bets on $5.04 billion in sales and $0.73 in EPS, likewise short of the Street’s expectations calling for $5.3 billion in sales and $0.76 in EPS from the giant.

In a nutshell, “We think QCOM is likely to print slight downside vs. expectations for Mar-qtr and guide Jun-qtr below Street estimates due to: 1) Muted iPhone Units: Our conversations with AAPL supply chain partners and TSMC’s soft Jun-qtr guidance have suggested AAPL will curtail iPhone channel inventory aggressively ahead of fall 2018 product launches. 2) China Smartphone Market: We believe China smartphone market remains muted, and our conversations with supply chain partners indicate MediaTek will become incrementally active in China. We see competition between QCOM and MediaTek at China OEMs to intensify (especially at Oppo and Vivo); and 3) Muted Samsung GS9 units. We think QCOM stock continues to be event driven (NXPI & MOFCOM). Despite near-term headwinds, we continue to believe that 2-3 catalysts are on the horizon – licensing resolutions (AAPL & Huawei), NXPI close or material buyback, and cost cutting program,” contends the analyst.

Amit Daryanani has a very good TipRanks score with an 80% success rate and one of the highest ranking on Wall Street: #19 out of 4,776 analysts. Amit Daryanani yields 26.6% in his annual returns. However, when recommending QCOM, Daryanani forfeits 18.5% in average profits on the stock.

TipRanks indicates cautious optimism circles the chip giant when it comes to Wall Street majority sentiment. Out of 16 analysts polled in the last 3 months, 8 are bullish on Qualcomm stock, 7 remain sidelined, while 1 is bearish on the stock. With a solid return potential of 32%, the stock’s consensus target price stands at $66.79.

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