Baird analysts added Qualcomm (NASDAQ:QCOM) stock as a “Bullish Fresh Pick” and raised the target price on the stock to $250.
The revision comes as Baird’s initial channel feedback revealed a procurement units estimate of more than 90 million for the upcoming iPhone 16, marking a notable uptick from the low 80 million procurement units of prior iPhone launches.
“Similar to the Galaxy S24 launch earlier this year, AI is the driver,” analysts said in a note.
“We expect strengthening demand trends in Qualcomm's handset business in C3Q post a C2Q seasonal trough and post a C1Q trough in YoY comps,” they added.
Baird’s team believes that AI will drive double-digit increases in Qualcomm's average selling prices (ASPs) for various components, beginning with the iPhone 16 in the second half of this year.
Moreover, initial AI content in high-end phones from Chinese smartphone OEMs will contribute, followed by the next-generation Galaxy platform in the first half of 2025.
Radio Frequency (RF) ASP and content are also expected to benefit from AI starting in the second half, fueled by higher performance, faster uplinks, and greater integration.
From a unit standpoint, analysts said Qualcomm is set to gain from both RF share increases, initially reported by Skyworks, at Apple (1-1.5GHz), along with initial shipments to Chinese smartphone OEMs for lower-end phones, which will displace local suppliers of discrete RF components.
The investment firm also noted an initial strong response for Qualcomm’s Snapdragon X Elite processor in South Korea, as the chipmaker is the first to market in the initial wave of AI in PCs.
Samsung has launched Copilot+ PCs based on the X Elite, with demand surpassing initial channel expectations, Baird noted. Besides Samsung, the X Elite is also currently being shipped by HP, Dell, Acer, Microsoft, and Lenovo.
“We would be buyers of QCOM shares on recent share pullback,” analysts concluded.