Market Overview

Societe Generale Upgrades Qualcomm to Hold; What Chip Companies Could Benefit?


Analysts at Societe Generale upgraded shares of Qualcomm (NASDAQ: QCOM) from Sell to Hold on Monday morning with a $57 price target.

During the trading session, QCOM shares have fallen around 1% as technology stocks are once again lagging in the broader market. The analyst wrote that "visibility on Qualcomm's Q3 12 and Q4 12 outlook is reduced vs. prior periods, with strong performances by key customers Apple and Samsung vs weakness at others including Nokia and RIM. Foundry sales suggest that business is holding up, and while constraints on new 28nm device availability will likely continue to restrain near-term guidance, relief should come onstream by end-2012."

Year-to-date, QCOM shares have lost less than 1 percent, but the stock is well off of the highs witnessed in late March and early early April. The 52-week range in the shares is $45.98-$68.87. This compares to QCOM's current price of $54.40. At current levels, Qualcomm is yielding around 1.84% and has a market cap of just over $93 billion. The stock trades at a trailing P/E of 16.40, a forward P/E of 13.15, and a PEG ratio of 0.96.

There are a wide variety of competing semiconductor names that could benefit from the same trends as Qualcomm. Among the most prominent is global chip leader Intel (NASDAQ: INTC). This stock is very cheap and could be a strong value at current levels. One thing that separates Intel from many of its tech peers is its tremendous dividend yield, which is currently above 3.30%. This dividend yield combined with Intel's forward P/E of below 10 and a PEG ratio well below 1 makes the stock look like a classic value play.

Broadcom (NASDAQ: BRCM) is another large semiconductor company which feeds into similar markets as Qualcomm. While Broadcom has not moved much in recent years, it is a high quality name which also pays a dividend. At current levels, Broadcom shares are yielding a respectable 1.30 percent. Year-to-date, the stock has added roughly 5 percent.

Two other chip names that investors might find interesting at current levels are Nvidia (NASDAQ: NVDA) and Marvell Technology (NASDAQ: MRVL). Nvidia is a leader in the graphics chip market, but the stock has been disappointing in 2012, falling 9%. Over the last 52-weeks, Nvidia is down more than 11 percent. The current valuation, however, looks attractive as the entire sector has been out of favor. The stock trades at a forward P/E below 14 and a PEG ratio of 1.12.

Marvell Technology is another chip name that has been absolutely crushed. Year-to-date, the stock has lost 25% and is sitting near new 52-week lows. The interesting thing about this company is the presence of top value-oriented hedge fund manager David Einhorn. As of its last 13-F filing, Einhorn's Greenlight Capital owned 2.87% of the company. While Einhorn isn't always right, he is one of the most successful investors in the world and the fact that he is bullish on MRVL is enough to warrant a look at the stock from other investors.

Posted-In: Analyst Color Long Ideas Short Ideas Dividends Upgrades Hedge Funds Price Target Technicals Best of Benzinga


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