Qualcomm Analysts Hike Targets On 'Stunning' Q4 Results, Expect 5G Boost

QUALCOMM, Inc. QCOM shares were trading notably higher Thursday after the chipmaker issued a strong quarterly report.

The Qualcomm Analyst: BofA analyst Tal Liani reiterated a Buy rating on Qualcomm shares and increased the price target from $165 to $180.

Piper Sandler analyst Harsh Kumar reiterated a Neutral rating and hiked the price target from $110 to $140.

UBS analyst Timothy Arcuri maintained a Neutral rating and raised the price target from $105 to $125.

Rosenblatt Securities analyst Kevin Cassidy maintained a Buy rating and increased the price target from $130 to $155.

BofA Says Stars Aligning For Qualcomm: Qualcomm reported fiscal year fourth-quarter results that came in well ahead of the consensus estimates despite the delayed iPhone 12 launch, Liani said in a note.

The chipmaker's above-consensus first-quarter guidance is reflective of several smartphone launches, the analyst said. 

The smartphone market, which was down 5% year-over-year in the fourth quarter, is expected to remain lower in calendar year 2021, he said, citing the company. 

Once 5G gains momentum, the market is likely to improve, and Qualcomm will be a prime beneficiary, given its 110 royalty agreements with all major OEMs, Liani said.

The analyst noted that Qualcomm CDMA Technologies rose 30.1% to $4.97 billion, with mobile station modem system-on-chips seeing shipment growth of 7% and ASP growth of 29%.

"We believe the stars are aligning for Qualcomm, with a multi-year global 5G cycle starting to ramp, the full benefit of royalties from all major OEMs, increases in semiconductor content and pricing, and technology leadership."

Related Link: 4 Semiconductor Ideas Ahead Of Q3 Earnings

Why Qualcomm Continues To Benefit From 5G Proliferation: The December quarter will benefit from premium smartphone launches, Kumar said in a note, adding that the company is also seeing a rebound in its automotive and IoT segments. 

The company is expecting a return to somewhat normal seasonality in the March quarter, the analyst said.

Qualcomm estimates a 150% year-over-year increase in 5G smartphones in calendar year 2021 to 500 million units, he said. 

"Overall, the company continues to benefit from the proliferation of 5G and the attach of RF, while margins are steadily increasing."

UBS Warns Of Inventory Correction: Company-specific debates continue to play out in Qualcomm's favor, Arcuri said. 

Yet an enormous gap has opened up between smartphone component sell-in and smartphone sell-through, the analyst said. This gap portends an inventory correction that may be forthcoming even in a strong 5G year in calendar year 2021, he said. 

"So while we like the 5G opportunities for QCOM – especially non-handset adjacencies – this suggests to us that a component inventory correction is looming and we simply cannot recommend chasing the stock at these levels." 

Qualcomm A 5G Pure Play, Rosenblatt Says: Qualcomm's "stunning" results were mainly due to an increasing dollar content, with increasing 5G mix and adoption of its RFFE solutions plus MSM shipments at the higher end of expectations, Cassidy said in a note.

The company increased the calendar year 2021 smartphone shipment estimates to 450-550 million, driven by aggressive pricing by Chinese OEMs, the analyst said. 

The December quarter guidance for 26% revenue growth is primarily due to the well-advertised iPhone 12 launch, he said. 

The company's move from reporting MSMs to a more traditional method of end market exposures along with total RFFE revenue shows management confidence in gaining RFFE market share and expanding revenue in the IoT and Automotive markets, Cassidy said. 

Rosenblatt continues to recommend Qualcomm shares.

"We view the 5G evolution as in the very early stages of growth. Qualcomm is the pure play investment for the 5G market," the analyst said. 

QCOM Price Action: At last check, Qualcomm shares were surging higher by 13.06% to $145.82. 

Related Link: Todd Gordon's Qualcomm Options Trade