Susquehanna Upgrades Qualcomm, Sees 30% Snapback Coming

• Shares of QUALCOMM, Inc. QCOM have declined 37.49 percent over the past year, dropping almost to their 52-week low on January 8 at $45.875.
• Susquehanna’s Chris Caso has upgraded the rating on the company from Neutral to Positive, while raising the price target from $53 to $60.
• Although some risks remain for the company, Caso believes that much of this is already discounted for in the stock, while the risk-reward has come compelling once again.

Analyst Chris Caso explained that “it’s been a difficult 18 months, with the China issues compounded by pressure on royalties as well as a disastrous product cycle for their flagship chipset,” while mentioning that these difficulties provide Qualcomm “a good base from which to grow in 2016.”

See Also: Why Qualcomm Never Broke Up

With China-related issues having mostly been resolved and the company having proven that it could collect royalties in China, Caso expressed increasing confidence that Qualcomm would be able to continue to collect royalties globally.

“In addition, we expect the upcoming Snapdragon 820 product cycle to represent a significant improvement for the chipset business, with numerous customer product launches in 1H16,” Caso said.

Expressing concern regarding the ongoing government investigations, Caso also mentioned that some risks still remain for the company, given the intense competition in the chipset market and the near-term slowdown at Apple Inc. AAPL.

However, Caso added that given the 4 percent dividend yield and 10 percent free cash flow yield, the risk-reward on the stock has become compelling once again.

The revenue and EPS estimates for C4Q and the March quarter have been raised, while those for C16 have been lowered to reflect a reduction in estimates for Apple.