Susquehanna Upgrades Qualcomm (QCOM) to Positive; Expects Snapback Amid Recent China Difficulties

Susquehanna upgrades Qualcomm (Nasdaq: QCOM) from Neutral to Positive and lifts its price target from $53 to $60.

Analyst Chris Caso commented: We had downgraded QCOM 18 months ago, mainly on the uncertainty on China royalties. Since then, it’s been a difficult 18 months, with the China issues compounded by pressure on royalties (as AAPL and the Chinese took share from Samsung) as well as a disastrous product cycle for their flagship chipset.

But we think these difficulties (along with the corresponding drop in the stock price) provide a good base from which to grow in 2016. The China issues are now mostly resolved, and the fact that QCOM has proven that they can collect royalties in China makes us incrementally more confident that they can continue to collect globally.

In addition, we expect the upcoming Snapdragon 820 product cycle to represent a significant improvement for the chipset business, with numerous customer product launches in 1H16. To be sure, some risks still remain, given continuing government investigations, intense competition on chipsets (particularly from INTC) and the near-term slowdown at AAPL.

But we feel the current stock price discounts much of this risk, and with a bias toward estimate upside this year, not to mention a 4% dividend yield and a 10% FCF yield, we think the risk/reward for the stock has once again become compelling.

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

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