Is Qualcomm Finally A Buy After 18 Months Of Negativity?

On Tuesday, Bernstein issued a company note on Qualcomm Inc. QCOM after the company's falling share price has caused analysts to believe there is a favorable risk/reward upside to owning the stock. Analysts at Bernstein upgraded Qualcomm from Market-Perform to Outperform and raised their price target from $50 to $55. Stacy Rasgon and Yang Ren, analysts at Bernstein, wrote, "QCOM's stock has de-rated significantly on the back of increasing issues with both businesses and multiple rounds of negative revisions. However, we now have more comfort with the trajectory of royalty rates, and the current share price already appears to be pricing in extremely negative long-term scenarios. We believe the shares have a positively-biased risk-reward at current levels." Analysts at Bernstein gave two key reasons why they upgraded Qualcomm: 1. Royalty rates After a recent analyst day, Bernstein has more visibility regarding the size and consistency of Qualcomm's royalty fees, particularly as it relates to regulations in Korea. This knowledge has analysts more confident regarding Qualcomm's potential for top line growth. 2. Attractive valuation Bernstein believes that Qualcomm's stock has a significant opportunity for upside, with shares trading at only 9x consensus 2017 estimates. Furthermore, Qualcomm has a strong balance sheet with a sizable dividend yield which may further attract investors and increase share price. Qualcomm last traded at $44.56.