Qualcomm Is A Victim Of Its Own Success, Says Bearish Wells Fargo

Qualcomm, Inc’s QCOM success limits its ability to gain the market share needed to grow in the smartphone space, which is mature and stagnant, according to Wells Fargo.

The Qualcomm Analyst

Gary Mobley initiated coverage of Qualcomm with an Underweight rating and $70 price target. 

The Qualcomm Thesis

Given Qualcomm’s dominance of the smartphone market, there is an industry-wide reluctance to rely too heavily on the company’s MSM processors and related radio frequency front end solutions, Mobley said in a Monday initiation note. (See his track record here.)

This, coupled with the need for anti-competitive regulatory compliance, makes Qualcomm a victim of its own success, the analyst said. 

The company faces headwinds related to the U.S.-China trade tensions and America’s inclusion of Huawei on the restricted list, he said. 

“An anti-U.S. sentiment in China and Huawei’s own influence in the development of 5G standards may create a tepid environment for QCOM as it attempts to address the World’s largest mobile handset market (and to collect royalties within China).”  

Moreover, original equipment manufacturers focusing on developing integrated processors internally works against merchant chipmakers like Qualcomm, Mobley said.

While 2020 could be a good year for the company, there will likely be challenges in 2022 and beyond, the analyst said. 

QCOM Price Action

Shares of Qualcomm were down 1.15% at $74.77 at the time of publication Monday. 

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