Apple’s hotly anticipated iPhone 12 launch hogged Tuesday’s technology headlines, but for Canaccord analyst Michael Walkley, the launch acts as confirmation of the bull thesis for chipmaker Qualcomm (QCOM).
With all four new models boasting 5G capabilities, it is Qualcomm, Walkley says, that stands to benefit from the new “long-term 5G investment cycle.”
“We anticipate strong earnings in F2021 and beyond as 5G smartphones ramp, the mix of 5G growth benefitting Qualcomm with 50% greater content than a 4G smartphone, Apple re-enters the model for QCT shipments, and Huawei returns to the model for licensing payments,” the 5-star analyst said.
Qualcomm has already signed off on long-term deals with all leading OEMs and its QTL (Qualcomm Technology Licensing) segment now boasts over 100 5G licenses.
Walkley believes the mix of steadily improving smartphone sales and the 5G opportunity should “lead to sustained growth through F2022.” The analyst estimates “the mix of 5G smartphones will grow from roughly 200M units in C2020 to 450M-500M units in C2021 to roughly 1B units in C2022.”
In fact, together with strong growth opportunities in markets such as IoT and automotive, Walkley anticipates QCT (Qualcomm CDMA Technologies) will grow its revenue from $16.10 billion in F2020 to $24.2 billion in F2022.
Moreover, at Apple’s launch event, Verizon’s CEO joined the presentation to announce its goal of bringing 5G Ultra-Wideband services to 60 cities this year. For Walkley, Verizon’s ambition further adds to the Qualcomm bull case.
“We view the concurrent iPhone launch and Verizon announcement as a strong positive for 5G customer adoption as 5G service expands across the globe at a greater scale. With 5G sales ramping and Qualcomm’s leadership position, we believe this should drive strong earnings growth,” Walkley summed up.
All in all, Walkley reiterated a Buy on QCOM shares, alongside a $150 price target. What’s in it for investors? Upside of 16% from current levels. (To watch Walkley’s track record, click here)
The Street currently has a cautiously optimistic outlook for the chip giant. The analyst consensus rates Qualcomm a Moderate Buy based on 15 Buys vs. 8 Holds. However, shares have had a bountiful 2020 and are up by 44% year-to-date, and as such, the $128.33 average price target suggests they will stay range bound for the foreseeable future. (See QCOM stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.