On Monday, KeyBanc maintained its Sector Weight rating on Qualcomm (NASDAQ: NASDAQ:QCOM), with a fair value of $150. This decision followed a U.S. federal jury’s ruling on Friday that Qualcomm did not breach Nuvia’s license agreement with ARM. According to the analyst, Qualcomm’s current trading at a forward consensus price-to-earnings (P/E) ratio of 13x is in line with its three-year historical average.
The stock closed on December 20, 2024, at $152.89. InvestingPro analysis suggests the stock is currently undervalued, with a P/E ratio of 16.9x and strong financial health metrics.
The analyst’s valuation of Qualcomm is based on 14 times the firm’s estimated earnings per share (EPS) of $10.63 for the fiscal year 2025. The company has demonstrated financial strength with a 2.4x current ratio and has maintained dividend payments for 22 consecutive years, currently yielding 2.2%. Despite the reaffirmation of the rating and fair value, the analyst noted that market and macroeconomic risks could impact the stock’s performance. Company-specific issues such as potential displacement of its modem by Apple (NASDAQ:AAPL)’s own development, verticalization by mobile original equipment manufacturers (OEMs), mobile chipset competition, and a maturing smartphone market were also cited as potential risks.
In contrast, the analyst reiterated an Overweight rating for ARM with a price target of $195, anchored on twice the calendar year 2026 price-to-earnings growth (PEG) ratio. ARM’s stock, which closed at $132.15 on December 20, 2024, is currently trading at a PEG ratio that matches the analyst’s estimate and is double that of ARM’s broader peer group’s average.
The analyst highlighted that while ARM’s valuation aligns with the electronic design automation (EDA) industry average, there are factors that could disrupt the achievement of the set price target. These include uncertainties in the semiconductor end-market demand recovery, competitive pressures from x86 architectures, and execution risks specific to the company.
In other recent news, Qualcomm emerged victorious in a legal dispute with Arm Holdings (NASDAQ:ARM), a significant event given the major tech firms’ reliance on Arm’s chip architecture. The jury confirmed that Qualcomm’s integration of technology from its $1.4 billion acquisition of Nuvia Inc. in 2021 did not require additional licensing fees. Meanwhile, Mizuho (NYSE:MFG) Securities maintained an Outperform rating on Qualcomm, reducing the price target to $215, highlighting the company’s momentum in augmented reality and the anticipated PC market tailwinds through to 2026.
In other developments, a high-stakes trial between Arm Ltd and Qualcomm commenced, centered around Qualcomm’s use of Arm’s intellectual property and Qualcomm’s acquisition of Nuvia. The leadership at Qualcomm is also set to change, with the retirement of Chief Technology Officer Dr. James H. Thompson and the appointment of Dr. Baaziz Achour as the new CTO.
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