There’s no doubt investors’ enthusiasm for Qualcomm (QCOM) has been subdued in 2021. This is evident from the stock’s display, which despite recent gains, still sits 5% into the red on a year-to-date basis.
J.P. Morgan’s Samik Chatterjee puts the underperformance down to “fading momentum around the limited interest from investors in focusing on a 5G smartphone theme.” According to Chatterjee, there are several reasons for the lack of interest: “1) tougher smartphone industry outlook driven by China; 2) 5G adoption going forward expected to be largely driven by lower mix units in China; and 3) supply constraints for Qualcomm limiting its ability to participate fully in the 5G cycle led upside in the near-term.”
However, maybe the recent share gains are indicative of a stock shaking off the doldrums. At least Chatterjee seems to think so. The analyst notes that while momentum has cooled around “thematic 5G smartphone adoption,” there are still company-specific upside drivers set to come to the fore in the second half of the year, and these should help build momentum into next year as “adjacent market opportunities start to gather pace.”
These “growth opportunities in adjacent markets” include smartphone RF, IoT, and Autos. Whilst the easing of supply constraints should also help recoup “baseband share” which in turn will alleviate investor concerns around “sustainability of growth drivers beyond the 5G smartphone baseband content gains.”
With these opportunities at play, Chatterjee’s forecast for FY22 revenue and EPS, reflect his bullish stance. These come in at $36.3 billion and $9.20, respectively, and are above the consensus estimates of $35.3 billion and $8.72.
Closer to the present, when Qualcomm reports F3Q earnings on Wednesday (July 28), Chatterjee believes “market share gains and momentum for Apple” to will help boost QCOM revenues.
As such, Chatterjee’s $7.7 bbillion revenue forecast is above the consensus calls for $7.6 billion and his EPS estimate of $1.74 is also higher than the Street’s $1.69 forecast. Looking forward into F4Q, Chatterjee sees upside to current estimates too, anticipating revenue of $8.7 billion vs. consensus at $8.5 billion and EPS of $2.09 compared to Wall Street’s $2.07 estimate.
Overall, Chatterjee sticks to an Overweight (i.e., Buy) rating alongside a $175 price target. The implication for investors? Upside of ~24%. (To watch Chatterjee’s track record, click here)
J.P. Morgan’s objective aligns almost perfectly with the Street’s view, where the $174.75 average price target is virtually the same. Rating wise, opinions are mixed, but tilting in the bulls’ favor; based on 10 Buys vs. 6 Holds, the stock has a Moderate Buy consensus rating. (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.
