Reflecting on its May 4 initiation of QUALCOMM, Inc. QCOM shares at Underweight, Wells Fargo Securities said it may have got the rating wrong.
The Qualcomm Analyst: Gary Mobley upgraded Qualcomm from Underweight to Equal-Weight and increased the price target from $90 to $120.
The Qualcomm Thesis: A combination of systematic and unsystematic issues have worked against Wells Fargo's earlier bearish stance, which was based on the belief that Qualcomm would underperform other covered names as well as the semiconductor group overall, Mobley said in a Tuesday upgrade note.
The Philadelphia Semiconductor Index has rallied about 40% since May, with much of the upside stemming from a 60% advance by Qualcomm, which is the most heavily weighted component in the index, the analyst said.
Intel Corporation's INTC 7nm delay has most likely benefited other large-cap semiconductor stocks, including Qualcomm, he said.
Among company-specific developments, Wells Fargo said it failed to appreciate the likelihood of a license agreement with Huawei or the successful appellate outcome of the original FTC ruling against Qualcomm.
"Our change in rating today is more so a function of our belief QCOM could be dealt a gift from the newest few rounds of US Commerce Dept.'s export restrictions impacting Huawei, something that may directly or indirectly help QCOM," Mobley said.
Although a rerating could occur based on developments in the smartphone market, the stock is appropriately valued for now, according to Wells Fargo.
QCOM Price Action: At last check, Qualcomm shares were climbing 2.36% to $121.91.
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