QUALCOMM Analyst Roundup Following Q1 Results

January 28, 2015

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QUALCOMM, Inc. (NASDAQ: QCOM) shares fell following its Q1 earnings release on Wednesday.

The company cut its 2H15 guidance in the earnings report and as of Thursday morning the stock was down 10.11 percent to $63.81.

Analysts commented on the results following the announcement and were still bullish on the stock. Below are highlights along with current ratings and price targets.

Brean Capital – Buy, $80 price target

“Qualcomm announced a beat-and-raise last night with solid December quarter results and increased March guidance, driven primarily by demand in Emerging Markets and a strong replacement cycle in the US driven by the iPhone. However, the main story was the Company’s lowered 2H15 QCT guidance due to Samsung opting for its in-house (Samsung LSI) applications processor, ‘Exynos’, (and potentially basebands as well) over QCOM’s Snapdragon 810 for its upcoming flagship launch (the Galaxy S6).”

Citi – Buy, $88 price target

“We calculate the $800M revenue shortfall represents roughly 20-25M Snapdragon 810 chips at a price point of approx. $30-40 and that the ~$500M in lost net income (represented by the $0.30 EPS guide-down) represents an appropriate 60-65 percent incremental gross margin on what are QCOM’s highest-end and highest margin chips – note QCOM pays very little if any taxes on its chip business.”

Morgan Stanley – Equal-weight, $72 price target

“As part of its earnings release, the company announced that it had reached resolution with one of its Chinese licensees, from which it had been unable to collect royalties for the past few quarters. As part of the resolution, management indicated that it would collect back royalties (to be recognized in the March quarter). While Qualcomm declined to comment on relative royalty rate levels or other details, we find it encouraging that the Chinese licensee decided that it was in its best interest to go ahead and pay the back royalties ahead of the finalization of the NDRC’s work.”

Credit Suisse – Outperform, $80 price target

“Valuation compelling, but may take time to repair…Using reverse SOTP analysis, given QCT is worth $28 and fully taxed net cash/sh of $13, the current price of approximately $65 implies QTL is valued at $24. Using a reverse DCF, this implies that Chinese vendors secure more than 60 percent of the QTL's TAM long term and 70 percent of smartphone market share, and pay 0 percent royalties, which we believe is overly conservative. “

Nomura – Buy, $75 price target

“While the outlook is worse than our expectations, the company made progress in China by announcing resolution with a key licensee. We believe that settling the NDRC investigation is an important catalyst for shares. We believe shares remain attractively valued, trading at less than 10x enterprise value to free cash flow, based on an after-market price of $65 per share.”