Qualcomm: Well Positioned to Take Advantage of Upcoming Opportunities

It was around this time last year that Qualcomm (QCOM), the stock was in the midst of a strong rally that would take it to record highs in February. Since then, the stock has retreated, and in fact the stock is in negative territory at 4% year-over-year, a performance well below the SOX’ (the semiconductor benchmark index) 22% gain.

However, after talks with CFO Akash Palkhiwala, Mizuho’s Vijay Rakesh sees a lot of positives about it and expects the shares of the world’s largest mobile chipmaker to reach new highs in the next 12 months.

Rakesh reiterated a buy on QCOM stock backed by a $180 price target. The implications for investors? Top of 23%. (To view Rakesh’s track record, click here)

Qualcomm’s bullish case at the moment is based in part on the 5G windfall. While there have been recent concerns among investors about “slower resale data for Chinese handset OEMs”, short-term demand outpacing supply with 5G and new design gains at Huawei spin-off HONOR provide “significant new opportunities in 2H21/2022”. The company is particularly pleased with three recent wins in the Honor phone series with QCOM modem + RFFE chips.

While Qualcomm expects QCT supply constraints to last through 2022, it sees “strong” QCT trends, with growth driven not only by handsets, but also automotive, telematics and industrial IoT.

There is also a “potential benefit” from deploying 5G facilities at the Beijing 2022 Winter Olympics, which is currently in the “early stages” of mmWave testing and the “scale size of a full network for most countries”. Add to that the future entry into the PC/NB market of 300 million units by the end of 2022 through the Nuvia acquisition – with CPU revenues coming in 2023/24 – and the opportunities just pile up.

And as for the “800-pound Gorilla in the room,” Apple’s potential iPhone chip/modem insourcing in 2023?

“We believe there is significant IP and complexity in the 5G QCT deployment, making this a challenging transition,” said the 5-star analyst. That said, we believe Apple could potentially bring in low-end iPhones while keeping high-end on QCOM (similar to Samsung’s strategy), and while it could be a headwind for QCT, the QTL side may still be largely intact.”

Most analysts agree with Rakesh’s position. QCOM stocks have a strong buy consensus rating, based on 10 buys versus 2 held. The average price target is even slightly higher than that of the Mizuho analyst; at $184.58, the figure suggests a 26% annual gain. (See Qualcomm stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.