BofA: We're Upgrading Qualcomm To Buy

In a report published Tuesday, BofA Merrill Lynch analysts upgraded the rating on

to Buy, with a price objective of $80, saying that the negatives are already priced into the company's stock. The upgrade in rating reflects that the negatives are now widely expected as well as "stabilization of royalty trends, potential margin upside, improvement of capital returns, attractive valuation, supportive sum-of-parts analysis and a view that semiconductors trends/expectations are at their low point currently and should improve in 2016," the analysts wrote. In the report BofA Merrill Lynch noted, "Mix shift to emerging markets should drive QTL growth deceleration in the coming few years, yet we expect the royalty income to stabilize at low single digit growth rate and remain stable for multiple years. We believe the potential risks to the royalty rate, such as the agreement in China and single mode LTE, are well contained." Restructuring could result in margin expansion and an improvement in the QCT cost structure. This could also result in improved capital returns, "as the $31.6bn cash war chest" allows the company to hike its dividend yield from the current level of 2.6 percent.