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Qualcomm: Losing Apple Might Be No Big Deal After All

If losing its Apple business appeared once to be a real overhang for Qualcomm (QCOM), then it might be time to review that thesis.

Shares of the chip giant clocked an all-time high on Tuesday after the company’s analyst day provided investors with reassurances the business is in rude health with or without Apple’s support.

Mizuho’s Vijay Rakesh was there to get the lowdown and walked away impressed. “We believe QCOM continues to execute well as it laid out a strong 5G and connectivity roadmap with solid QCT growth at a mid-teens% CAGR ’21-’24 despite some investor concerns on loss of Apple as it takes iPhone components in-house,” the 5-star analyst said.

While in the US, iPhones have cornered more than 50% market share, it is a different story on the global scene, with Android devices taking the lion’s share of the market. And Qualcomm is no laggard here with the company providing modems and chips for the premium and high-end Android market. What’s more, the company is well-positioned due to the growing market share of customers Vivo, Oppo and Xioami.

The company can also rely on 50% higher content for 5G compared to 4G, 5G handset shipments rising to over 1 billion by 2024E, and a “shifting OEM landscape in China.” As such, Rakesh expects Qualcomm to exhibit above market growth in the Android ecosystem. In fact, the analyst believes Qualcomm’s target of a 12% CAGR (compound annual growth rate) already factors in Apple revenue dropping to a LSD% (low single-digit) of QCT by F24E.

But it’s not just the bullish outlook for handsets. Rakesh expects the company will “continue to benefit from an increasingly connected world,” noting the opportunity in adjacent markets such as Auto, IoT, RFFE, which are all expected to grow at the same level as handsets or faster, boosted by the Snapdragon portfolio – Qualcomm’s suite of system on a chip products.

The company sees Automotive expanding at a CAGR of 36% which by F26 could generate revenue of $3.5 billion – up from $975 million in F21, while for IoT, QCOM sees a 17% CAGR and “large” $67 billion TAM by 2024E.

Accordingly, Rakesh reiterated a Buy rating on QCOM shares, and raised the price target from $170 to $195. However, the recent rally has taken the shares to within 6% of Rakesh’s target. (To watch Rakesh’s track record, click here)

Going by the rest of the Street’s assessment, the shares are currently more or less trading at their value. Rating wise, based on 12 Buys vs. 7 Holds, the stock boasts a Moderate Buy consensus rating. (See Qualcomm 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.