Why This Apple Analyst Recommends Avoiding Qualcomm And Android-Related Stocks

A prominent Apple, Inc. AAPL analyst has warned of tough times ahead for Android phone manufacturers.

Order Cuts Across Android Supply Chain: Major Chinese Android brands have lowered their orders by another 100 million orders since TFI Securities' previous survey on March 31, analyst Ming-Chi Kuo said in a tweet.

Taiwanese Android chip supplier MediaTek and U.S.-based Qualcomm, Inc. QCOM have cut 5G chip orders for the second half of 2022, the analyst noted. The former has lowered fourth-quarter orders by 30-35%, while the latter has cut high-end Snapdragon 8 series orders by about 10-15%, he added.

Qualcomm's SM8475 and SM8550 shipment forecasts remain unchanged, he noted.

Kuo expects shipments of cameras and lenses for Android smartphone brands to decline by 20-30% in the third quarter.

"iPhone shipment is still better than Android," Kuo said.

Related Link: Noted Tesla, Apple Analyst Says Consumer Electronics Demand 'Disappearing, Not Deferred,' Sees Further Stock Downside

Implication For Stocks: The 5G chip and camera are both key smartphone components, and the second-half shipment trends of these two items for Chinese Android brands suggest the peak season will remain muted in 2022, Kuo said.

The predicament reflects weak demand trends in China, Europe, and emerging markets, he added.

Order cuts for MediaTek and Qualcomm for the fourth quarter and the second-half suggest demand may not improve until the first quarter of next year, given the longer lead time for 5G chips relative to general components, the analyst said.

The analyst expects further downward revisions to consensus revenue and profit forecasts for MediaTek and Qualcomm for the period, from the third quarter of 2022 to the first quarter of 2023.

"The plunge in some stocks may recently provide opportunities to buy a bounce but suggests investors avoid the Android smartphone-related stocks," the analyst said.

Qualcomm closed Friday's session down 0.79% at $131.60, according to Benzinga Pro data.