Bernstein maintains Qualcomm stock outperform with $215 target

On Monday, Bernstein analysts maintained their optimistic outlook on Qualcomm shares (NASDAQ:QCOM), reiterating an Outperform rating and a price target of $215.00. The firm’s analysis suggests that Qualcomm is benefiting from solid performance in the smartphone sector, which saw approximately a 6% year-over-year growth in 2024. This growth is seen as a positive influence on Qualcomm’s business, given the company’s focus on high-end smartphone models. The company’s strong market position is reflected in its impressive financial metrics, with revenue growing at 8.77% and maintaining a healthy gross profit margin of 56.2%. According to InvestingPro analysis, Qualcomm currently appears undervalued relative to its Fair Value, with analysts setting price targets ranging from $160 to $270.

Qualcomm’s position in the market appears to be strengthened by a combination of factors. The company has managed to avoid some of the challenges faced by its competitors, thanks to its high flagship and high-end exposure. Additionally, Qualcomm is reportedly gaining share at Samsung (KS:005930), which could lead to increased share and content mix for the company. With a market capitalization of $191 billion and an impressive PEG ratio of 0.48, InvestingPro data shows the company is trading at an attractive valuation relative to its growth prospects. InvestingPro subscribers have access to over 30 additional financial metrics and insights about Qualcomm’s performance and valuation.

The potential challenges posed by Apple (NASDAQ:AAPL) are acknowledged but are already factored into market expectations. Meanwhile, the concerns regarding Huawei’s licensing, which is up for renewal, seem to have minimal impact as it now constitutes a minor part of Qualcomm’s business.

The firm also highlighted Qualcomm’s recent legal victory in the Arm litigation, which secures its future roadmap. The analysts see real potential in Qualcomm’s adjacent markets, suggesting that new growth opportunities might add significant value. The financial targets presented during the company’s analyst day are considered compelling by Bernstein analysts.

Furthermore, the excitement surrounding DeepSeek and AI-at-the-edge technologies is viewed as a potential boon for Qualcomm. The development of high-quality, compact AI models that can operate on devices increases the likelihood of discovering a transformative application for AI devices, which could further benefit Qualcomm’s standing in the market. The company’s strong financial health score of "GREAT" on InvestingPro, combined with its robust return on equity of 42% and consistent dividend history of 22 consecutive years of increases, positions it well to capitalize on these opportunities.

In other recent news, Arm Holdings (NASDAQ:ARM), a key supplier to chip manufacturers, is planning a significant shift in its business strategy by considering a price hike of up to 300% and designing its own chips. The company’s plans, known as the "Picasso" project, aim to increase annual smartphone revenue by approximately $1 billion over a decade. Meanwhile, Nvidia Corporation (NASDAQ:NVDA) is highlighted by Piper Sandler as the best positioned to benefit from growth in AI, autonomous driving, and physical AI due to its advanced chip technology. Qualcomm Inc . has also been active, reporting non-GAAP revenues of $10.2 billion and earnings per share of $2.69. Analysts from Mizuho (NYSE:MFG) Securities and KeyBanc have maintained an Outperform and Sector Weight rating on Qualcomm, respectively. Additionally, Qualcomm emerged victorious in a legal dispute with Arm Holdings, confirming that Qualcomm’s integration of technology from its $1.4 billion acquisition of Nuvia Inc. in 2021 did not require additional licensing fees. Finally, Mizuho Securities reduced the price target for Qualcomm to $215 from the previous $245 while sustaining an Outperform rating, highlighting the company’s momentum in augmented reality and the anticipated PC market tailwinds through to 2026.

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