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Qualcomm announced an expansion of its strategic partnership with Samsung last month.
Pau Barrena / AFP via Getty Images
KeyBanc believes Qualcomm’s initiatives to expand into other non-phone markets will succeed.
On Tuesday, analyst John Vinh reiterated his Overweight rating on the maker of mobile processors and 5G wireless chips, citing a recent conversation with
Qualcomm
’s
(ticker:
QCOM
) management. He also reaffirmed his $220 price target for the company’s shares.
The talk “enforced our long-term conviction in QCOM’s positioning in flagship [phones], particularly at
Samsung
,
and in the long-term sustainability of non-handset growth vectors,” he wrote.
Qualcomm shares were down 1% to $139.25 on Wednesday.
Vinh said the company’s stock is attractive, trading at just 10 times his fiscal 2023 earnings-per-share estimate. He is optimistic about Qualcomm’s ability to gain share in other markets outside of smartphones—including auto, augmented and virtual reality devices, and computers.
Last month, Qualcomm forecast less revenue than expected for the September quarter, citing softening demand for smartphones. At the time, it said revenue for the current quarter is likely to be between $11 billion and $11.8 billion—below the consensus of $12 billion.
Along with its financial results, Qualcomm also announced an expansion of its strategic partnership with Samsung. The two companies agreed to extend their patent license agreement through 2030 and expand their collaboration to use Qualcomm Snapdragon processors for future premium Samsung Galaxy products.
Vinh notes deteriorating demand for smartphones over the short term, but doesn’t think it should hurt Qualcomm’s profitability significantly.
“Despite weak demand trends, competitive pricing trends remain rational and stable and are unlikely to be a risk to near-term GM [gross profit margin],” he wrote.
Qualcomm stock has declined by 24% this year, versus the 28% drop in the
iShares Semiconductor ETF
(SOXX), which tracks the performance of the ICE Semiconductor Index.
Write to Tae Kim at tae.kim@barrons.com
