Qualcomm Will Underperform Peers, Analyst Says Citing Decline In QCT Sales To Apple

Zinger Key Points
  • The markets in which Qualcomm is diversifying into (i.e., auto) are simply not large enough to move the needle.
  • Investors are likely to “assign lower multiples to chip companies serving the no-growth mobile handset market.”

Shares of Qualcomm Inc QCOM have lost more than 36% year to date.

The stock is likely to continue trading at a discount to peers, especially due to the current weakness in the smartphone market, according to Wells Fargo.

The Analyst: Gary Mobley downgraded the rating for Qualcomm from Equal Weight to Underweight, while maintaining the price target at $105.

Check Out Other Analyst Ratings

The Thesis: Shares of companies with high smartphone exposure are likely to underperform the broader chip sector when investor sentiment towards the chip sector turns more positive or when investors believe the chip cycle has reached a trough, Mobley said in the downgrade note.

Qualcomm’s stock will continue underperforming peers because investors are likely to “assign lower multiples to chip companies serving the no-growth mobile handset market” and investors may begin to value the company’s shares “based on EPS power ex. MSM/RFFE shipments” to Apple Inc AAPL, the analyst stated.

Lack of growth in the smartphone segment and an “eventual decline in QCT sales to Apple” limit Qualcomm’s stock, he added. “The markets in which QCOM is diversifying into (e.g., Auto) are simply not large enough to move the needle for QCOM,” Mobley further stated.

QCOM Price Action: Shares of Qualcomm had declined by 2.75% to $115.78 at the time of publication Monday.

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorDowngradesAnalyst RatingsTechGary MobleyWells Fargo
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!