Analyst Presses the ‘Buy’ Button on Qualcomm (QCOM) Stock; Here’s Why
Many consider Qualcomm (NASDAQ:QCOM) the key to delivering on the promises of 5G, which could deliver wireless service as fast as wires now deliver. 5G would also deliver enough bandwidth for artificial intelligence, self-driving cars and other technological miracles of the 2020s.
Indeed, Rosenblatt analyst Jun Zhang believes Qualcomm will benefit from growth in the 5G smartphone market over the next few years. Based on his expectations that 5G smartphones will ramp faster than consensus believes, Zhang points out that Qualcomm will benefit from smartphone market upgrades to a higher ASM, and the company will see increasing royalty fees from a higher smartphone ASP.
As such, Zhang upgrades QCOM stock from Neutral to Buy, while raising the price target to $70 (from $56), which implies an upside of 5% from current levels. (To watch Zhang’s track record, click here)
Zhang noted, “China may begin 5G commercial service trials in the second half of 2019. In preparation for a global mass adoption of 5G services in 2020, we believe smartphone players will need to enable 5G on smartphones by the second half of 2019. We believe 30-50mn 5G smartphones will be produced in 2019, 100mn smartphones in 2020, and 200mn smartphones in 2021. The increasing speed of 5G networks will require faster processors, leading us to believe smartphone ASPs will continue to grow with processor content growth.” Furthermore, “With the potential adoption of Qualcomm’s 5G modem and RF module, we believe the company will reduce its 4G license fee. Despite a lower 4G license fee, the increase of 5G license fees is expected to offset the 4G reduction.”
Overall, Wall Street sizes up QCOM as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the chip giant. In the last 3 months, the stock has received eight bullish ratings versus 3 neutral and one bearish ratings. Yet, analysts (on average) conclude that the stock is fairly valued at around its current stock price.