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Qualcomm: Well-Positioned to Capitalize on Upcoming Opportunities

It was around this time last year that Qualcomm (QCOM) stock was in the midst of a strong rally which by February would take it to all-time highs. Since then, the stock has pulled back, and in fact on a year-to-date basis, shares sit 4% into negative territory, a performance some way off the SOX’ (the semiconductor benchmark index) 22% gain.

However, following discussions with CFO Akash Palkhiwala, Mizuho’s Vijay Rakesh sees much to be positive about and expects shares of the world’s largest mobile chipmaker to attain new peaks over the next 12 months.

Rakesh reiterated a Buy on QCOM stock backed by a $180 price target. The implication for investors? Upside of 23%. (To watch Rakesh’s track record, click here)

The bullish case for Qualcomm at present is partly based on the 5G windfall. While there have been recent investor concerns on “slower sell-through data for China handset OEMs,” near-term demand is “outstripping” supply with 5G and new design wins at Huawei spinoff HONOR driving “significant new opportunities into 2H21/2022.” The company is particularly pleased about three recent Honor phone series wins with QCOM modem+RFFE chips.

Although Qualcomm expects QCT supply constraints to last into 2022, it is seeing “strong” QCT trends, with growth driven not only by handsets but automotive, telematics, and industrial IoT too.

There is also “potential upside” from the deployment of 5G facilities at the Beijing 2022 Winter Olympics, currently in the “early stages” of mmWave testing and the “size of a full-scale network for most countries.” Add in the prospective late 2022 entry into the 300-million-unit PC/NB market via its Nuvia acquisition – with CPU revenues coming in by 2023/24 – and the opportunities are piling up.

And as to the “800-lb Gorilla in the room,” the potential iPhone chip/modem insourcing by Apple in 2023?

“We believe there is significant IP and complexity in the 5G QCT implementation that makes this a challenging transition,” the 5-star analyst opined. “That said, we believe Apple could potentially take low-end iPhones in-house, while keeping the high-end on QCOM (similar to the Samsung strategy), and while it could be a headwind to QCT, the QTL side could still be mostly intact.”

Most analysts are in agreement with Rakesh’s stance. QCOM stock boasts a Strong Buy consensus rating, based on 10 Buys vs. 2 Holds. The average price target is even a touch higher than the Mizuho analyst’s; at $184.58, the figure suggests one-year gains of 26%. (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.