Though Qualcomm (QCOM), like most companies, forecast weak June quarter numbers, a keen eye looking to 2021 and beyond will see plenty of value.
Indeed, Canaccord analyst Michael Walkley has no reservations when considering the semi -conductor giant’s prospects. In fact, the 5-star analyst recently raised his price target on Qualcomm shares from $95 to $102, while keeping his Buy rating intact. Investors can expect upside of 30%, should the target be met over the next 12 months. (To watch Walkley’s track record, click here)
Qualcomm beat Street expectations in last week’s earnings report. Revenue increased by 6% year-over-year to $5.2 billion and beat the Street’s forecast by $160 million. Non-GAAP EPS of $0.88 came in $0.09 higher than consensus estimates. The numbers were particularly encouraging, as QCOM delivered despite the pandemic, which resulted in a global handset market decline of 21% in the quarter.
Qualcomm anticipates a 30% drop in handset demand during Q3F20 (the current quarter), but with ongoing 5G infrastructure ramping up around the world, management reassured investors that long-term plans were unaffected by the global health crisis.
Nonetheless, with worries that renewed tensions between the U.S. and China could impede on Qualcomm’s potential to take advantage of the Chinese smartphone market, it is easy to understand why investors would be jittery right now. But the concern is not one shared by Walkley, who sees the resumption of normality in China as beneficial to the company.
Walkley said, “Our F2020/F2021 estimates remain largely unchanged with revenue slightly lower from $20.4B/$27.1B to $20.3B/$26.3B, and non-GAAP EPS estimates slightly higher from $3.40/$5.95 to $3.46/$6.02… We believe our estimates could prove conservative given China’s smartphone demand is starting to ramp and recover and Qualcomm has a strong roadmap and demand for its new 5G chipsets. We believe the June quarter will likely mark the low-point for Qualcomm earnings and anticipate steadily improving trends through year-end.”
With 18 analyst reviews on record, split into 9 Buys, 7 Holds, and 2 Sells, Qualcomm has a Moderate Buy consensus rating. Meanwhile, the average price target of $87.73, which implies an 11% upside potential in the next 12 months. (See Qualcomm stock analysis on TipRanks)
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