On Tuesday, JPMorgan adjusted its outlook on Qualcomm (NASDAQ:QCOM) shares, reducing the price target to $210 from the previous $230, while retaining an Overweight rating.
The firm's analyst cited the potential impact of Apple (NASDAQ:AAPL)'s move to in-source modems as a factor that could affect Qualcomm's revenue. The feedback from the supply chain suggests that this shift could be significant in the coming year.
The analyst acknowledged Qualcomm's multiple growth opportunities, such as regaining market share with Samsung (KS:005930), expanding into the PC market, and experiencing robust growth in the automotive and industrial IoT sectors.
Despite these prospects, there is a need for clarity on how the loss of Apple revenue will affect Qualcomm's earnings, which could create an overhang on the stock.
Qualcomm is praised for its technology leadership in the mobile compute SOC market, which is expected to extend beyond smartphones into automotive, IoT, PCs, and potentially data center servers.
The company's diversification strategy is also seen as a success, with growth in automotive, IoT, and PCs likely to offset the decline in revenue from one of its largest customers.
The updated financial forecasts from JPMorgan now include an anticipated earlier start to the revenue displacement from Apple, starting with the iPhone SE and followed by lower-end iPhone 17 models in calendar 2025. However, the forecasts also incorporate potential gains from reclaiming market share with Samsung on its flagship devices in calendar 2025.
In conclusion, JPMorgan's revised model predicts Qualcomm's earnings power to be around $13.00 by FY27 (ending in September), with Apple contributing only a modest amount of revenue after FY27.
Despite the adjustments, Qualcomm is still expected to achieve a healthy revenue compound annual growth rate (CAGR) of 6% over the forecast period.
In other recent news, Qualcomm has been in the spotlight due to a series of significant developments. The semiconductor giant is reportedly considering the acquisition of certain units from Intel (NASDAQ:INTC), specifically the client PC design business. This comes as Intel experiences a financial downturn and Qualcomm seeks to enhance its product offerings.
In addition to this potential acquisition, Qualcomm has confirmed its purchase of Sequans' 4G IoT technologies. This strategic move aims to bolster Qualcomm's industrial IoT portfolio, providing low-power solutions for reliable, optimized cellular connectivity for IoT applications.
On the analyst front, Wolfe Research downgraded Qualcomm from an "Outperform" rating to "Peer Perform," citing potential impacts from Apple's in-house modem development on Qualcomm's business.
However, Piper Sandler has increased its price target for Qualcomm shares to $205 from $185, maintaining an Overweight rating, following a strong recent financial report from the company.
These updates occur amidst a challenging global economic landscape, with Qualcomm acknowledging the impact of U.S. export restrictions on its revenue.
Despite these challenges, the company continues to anticipate strong fourth-quarter earnings, attributing this to robust demand for high-end Android devices and an increase in chips used in AI-enhanced smartphones.
InvestingPro Insights
As Qualcomm (NASDAQ:QCOM) navigates the evolving dynamics of its relationship with Apple and seeks growth in new markets, real-time data from InvestingPro offers a glimpse into the company's current financial health. With a market capitalization of $185.6 billion, Qualcomm stands as a significant player in the semiconductor industry. The company's P/E ratio sits at 21.38, reflecting investor sentiment and market valuation of its earnings. Despite a slight decrease in revenue growth over the last twelve months, Qualcomm's gross profit margin remains robust at 55.89%, indicating strong core profitability in its operations.
InvestingPro Tips highlight Qualcomm's longstanding commitment to shareholders, with the company having raised its dividend for 21 consecutive years, a testament to its financial stability and confidence in future performance. Additionally, Qualcomm is trading at a high P/E ratio relative to near-term earnings growth, suggesting that investors may be pricing in potential growth opportunities and market leadership. For those interested in deeper analysis and additional insights, InvestingPro offers a wealth of information, including 12 more InvestingPro Tips available at https://www.investing.com/pro/QCOM.
Overall, these insights provide investors with a snapshot of Qualcomm's financial landscape, complementing the analysis provided by JPMorgan and offering a broader perspective on the company's investment potential.
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