An analyst at BofA Securities came away bullish from a virtual event it hosted for QUALCOMM Inc. QCOM.
The Qualcomm Thesis: Qualcomm's CEO-elect Cristiano Amon sees exciting times for 5G, with a rate of deployment and subscriber growth tracking about two years faster than the 3G to 4G transition, analyst Tal Liani said in a Monday morning note.
About 500 million 5G users and 350 operators are launching 5G services in more than 100 countries, the analyst noted.
The CEO highlighted China, with close to one million 5G base stations on sub-six gigabit frequencies by year-end 2021 and mmWave deployment following in 2022, the analyst said.
On supply chain, Qualcomm said it manages constraints through innovation, product redesign through use of different sources, leverage of multi-sourcing for the leading node as well as updating capacity plans, he added.
Related Link: 4 Qualcomm Analysts On 'Capacity-Constrained' Quarter, 2021 Outlook
On potential M&A, Qualcomm isn't interested in getting inside the data centers and prefers to gain exposure to data center traffic expansion through the Intelligent Edge and connections to the cloud, Liani said, citing the company.
Strong and resilient market demand for handsets, especially in China, decline in Huawei's share, accelerated 5G transition and an improved mix drove 51% year-over-year growth for the technology licensing segment and 53% growth for CDMA technologies in the second quarter, the analyst noted.
On Apple Inc.'s AAPL announcement of its own modem, Cristiano pointed to a multi-year agreement with Apple, with only the first phone in the market now, Liani said.
Qualcomm, the analyst, noted believes that the surface area within Apple for a modem is substantial in size and could spell many types of different opportunities in the future.
"We affirm our Buy and $200 PO based on 5G deployment gaining momentum, strong market demand for handsets, and the company's innovative supply chain strategy," Liani wrote in the note.
Liani maintained a Buy rating and a $200 price target.
QCOM Price Action: At last check, Qualcomm shares were rallying 2% to $137.31.
(Photo: Qualcomm)
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