Morgan Stanley Downgrades Qualcomm On Valuation

Morgan Stanley has stepped to the sidelines on Qualcomm, Inc. QCOM, saying there's no longer the valuation gap with the company's semiconductor peers to make it as attractive.

The Analyst

Morgan Stanley's James Faucette downgraded Qualcomm from Overweight to Equal-Weight and raised the price target from $89 to $90.

The Thesis

Qualcomm's shares have jumped 33% since August as investors appear to have started banking on a high probability of a U.S-China trade agreement and are counting on 5G acceleration boosting the chipmaker, Faucette said.

Investors also seem largely unconcerned about a Federal Trade Commission antitrust case involving Qualcomm. A favorable appeals court ruling in the case in August buoyed investors and analysts, including Faucette, in hopes that it signaled an eventual Qualcomm win.

The move to 5G, some positives from a spring agreement with Apple Inc. AAPL on patent royalties, and prospects for a China trade deal could boost the stock, Faucette said in a note that they appear to be already priced into the stock.

Price Action

Qualcomm's was down 2.16% early Monday to $92 per share.

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