Why This Qualcomm Analyst Is Turning Bullish

Qualcomm, Inc. QCOM is an interesting option for investors willing to look beyond the pandemic for a 5G pure play, according to Bernstein.

The Qualcomm Analyst: Stacy Rasgon upgraded Qualcomm from Market Perform to Outperform and raised the price target from $105 to $135.

The Qualcomm Thesis: Qualcomm’s shares have been under pressure for more than five years due to the longstanding dispute with Huawei, Rasgon said in a Monday note. (See his track record here.)

With the dispute settled, Qualcomm represents a secular story and a way to play 5G “in the purest way possible,” the analyst said. Although Qualcomm cannot sell chipsets to Huawei at this point, it may do so sometime in the future, he said.

“Any announcement of such would act as a likely further catalyst for the stock,” Rasgon said. A deal like this could add 30 cents per share to Qualcomm’s earnings, the analyst said.

The Huawei dispute “validates QCOM's approach and portfolio” and indicates that a premium competition is unlikely to be available soon, he said.

"In the meantime, even in the middle of a pandemic the content story around 5G is (mostly) supporting things, and hope remains for a cyclical recovery next year."

Chipset margins could exceed 20% into 2021 as Apple Inc. AAPL ramps, according to Bernstein.

QCOM Price Action: Shares of Qualcomm were trading 4% higher at $109.83 at last check Monday.

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