Qualcomm Will Underperform Peers, Analyst Says Citing Decline In QCT Sales To Apple

Shares of Qualcomm Inc QCOM have lost more than 36% year to date.

The stock is likely to continue trading at a discount to peers, especially due to the current weakness in the smartphone market, according to Wells Fargo.

The Analyst: Gary Mobley downgraded the rating for Qualcomm from Equal Weight to Underweight, while maintaining the price target at $105.

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The Thesis: Shares of companies with high smartphone exposure are likely to underperform the broader chip sector when investor sentiment towards the chip sector turns more positive or when investors believe the chip cycle has reached a trough, Mobley said in the downgrade note.

Qualcomm’s stock will continue underperforming peers because investors are likely to “assign lower multiples to chip companies serving the no-growth mobile handset market” and investors may begin to value the company’s shares “based on EPS power ex. MSM/RFFE shipments” to Apple Inc AAPL, the analyst stated.

Lack of growth in the smartphone segment and an “eventual decline in QCT sales to Apple” limit Qualcomm’s stock, he added. “The markets in which QCOM is diversifying into (e.g., Auto) are simply not large enough to move the needle for QCOM,” Mobley further stated.

QCOM Price Action: Shares of Qualcomm had declined by 2.75% to $115.78 at the time of publication Monday.