KeyBanc Downgrades Qualcomm (QCOM) to Sector Weight

KeyBanc analyst John Vinh downgraded Qualcomm (NASDAQ: QCOM) from Overweight to Sector Weight.

The analyst comments: "We are downgrading QCOM to Sector Weight for the following reasons: 1. Our previous thesis was that QCOM would be increasingly viewed as an edge AI play given its positioning in handsets and PCs. However, given these end markets have yet to materialize in any meaningful manner, we don't foresee QCOM benefitting from a replacement cycle fundamentally or being given a market premium as an edge AI beneficiary until that happens. 2. Our supply chain work has confirmed that Apple will begin to ramp its internal modem in stages over the next several years. It's possible that over the next several years QCOM could offset this via growth in other end-markets, such as its ARM CPUs in PCs, industrial, and automotive. However, as this AAPL headwind is expected to increase over the next few years, we view this bear-case narrative will be difficult to overcome despite it being well known and remain an overhang until it's completely out of the numbers. We estimate the full impact of the modem coming out will represent a $1.55-$1.65 EPS headwind to earnings. 3. Finally, we believe that QCOM will start to lose market share to Mediatek in the mid-to-low end segment of the smartphone market, given increased price competition."

For an analyst ratings summary and ratings history on Qualcomm click here. For more ratings news on Qualcomm click here.

Shares of Qualcomm closed at $166.94 yesterday.

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