Qualcomm Is Worth Far More Than $48 Per Share; JPMorgan Pounds The Table

• QUALCOMM, Inc. QCOM have decline 35.33 percent year-to-date, falling to a low of $46.83 on December 14.
• Rod Hall of JPMorgan has upgraded the rating on the company from Neutral to Overweight, while lowering the price target from $57.50 to $55.00.
• The upgrade is based on the stock valuation, which Hall mentioned was now meaningfully below the bear case valuation levels.

Analyst Rod Hall mentioned, “With the ongoing negative press around both the QCT and the QTL segments, we believe that most investors are now focused on estimating the worst case valuation for Qualcomm.”

Hall believes the stock is worth $55 per share, assuming that QCT re-rates closer to peer multiples as its cost cutting initiatives bear fruit and scale improves.

Related Link: From Disappointment To Modest Optimism: The Street Is Mixed On Qualcomm

According to the JPMorgan report, “Our proprietary “big data” analysis of 2,142 essential patents and their expiration dates also informs our DCF of QTL. Given this attractive value and likely self help in 2016 we believe that Qualcomm now represents a solid buying opportunity.”

Hall expects QCT to “make strategic changes to diversify its business away from the wireless industry while simultaneously increasing cost savings.” For QTL, that the consensus valuation could prove to be too low.

Hall also explained that even if QCT's share at Samsung were to decline to zero in FY16 from 15 percent in FY15, it would translate to an 8 percent impact on the segment's EPS, or $0.10.

“We see this as conservative in light of the potential launch of new Snapdragon 820 smartphones by Samsung,” Hall noted.

The FY16 EPS estimate has been increased by one percent to $4.12.