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Qualcomm stock should continue to underperform, Wells Fargo cuts to Underweight

Published 12/12/2022, 07:59 AM
Updated 12/12/2022, 08:22 AM
© Reuters.  Qualcomm (QCOM) stock should continue to underperform, Wells Fargo cuts to Underweight
QCOM
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By Senad Karaahmetovic

Shares of Qualcomm (NASDAQ:QCOM) are down more than 2.5% in pre-market Monday after Wells Fargo analysts downgraded to Underweight from Equal Weight.

They also reiterated a $105 per share price target on QCOM stock, which implies a downside risk of nearly 12% relative to Friday’s closing price. The QCOM downgrade comes after the analysts cut Qorvo (NASDAQ:QRVO) and Skyworks (NASDAQ:SWKS) in October to reflect negative investor sentiment toward the chip sector.

Until “investors are convinced we've reached a trough in the chip cycle, we believe shares of companies w/high smartphone exposure should underperform the broader chip sector,” they said in a client note.

Moreover, they see QCOM trading at a discount to peers as it operates in the “no-growth mobile handset market”, as well as because “investors may begin to value QCOM shares based on EPS power ex. MSM/RFFE shipments to AAPL (our FY25 est. assumes decreasing AAPL QCT rev).”

Moreover, the analysts are also not very positive on the mid-term outlook for Qualcomm as its success beyond the iPhone 16 is dependent on the high-end Android smartphone community, “which may not be the best exposure to have,” they added.

Qualcomm stock is down nearly 35% year-to-date.

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