Morgan Stanley: Qualcomm Shares Undervalued
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 days ago
0mins
Should l Buy QCOM?
Source: seekingalpha
- Muted Market Expectations: Morgan Stanley analysts indicate that Qualcomm (QCOM) shares are currently priced for low single-digit growth, reflecting a cautious market outlook on future cycles, suggesting muted expectations.
- Valuation Comparison: Qualcomm's price-to-earnings ratio stands at approximately 15x, significantly lower than the peer average of 20x, indicating relative undervaluation in the semiconductor sector, although analysts warn that if growth falls short, valuations may compress further.
- Analyst Rating Divergence: While Morgan Stanley assigns an Underweight rating with a $132 price target, there are still 21 analysts with Overweight ratings on Qualcomm, highlighting a divergence in market sentiment regarding the company's future performance.
- Cautious Earnings Outlook: Morgan Stanley notes that Qualcomm's adjusted earnings per share are trading at around 11.5 times, at the lower end of its historical range, reflecting a cautious outlook on the smartphone market cycle, even as the broader semiconductor market remains optimistic.
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Analyst Views on QCOM
Wall Street analysts forecast QCOM stock price to rise
16 Analyst Rating
10 Buy
5 Hold
1 Sell
Moderate Buy
Current: 138.470
Low
165.00
Averages
197.14
High
225.00
Current: 138.470
Low
165.00
Averages
197.14
High
225.00
About QCOM
Qualcomm Incorporated is engaged in the development and commercialization of foundational technologies for the wireless industry, including third generation (3G), fourth generation (4G) and fifth generation (5G) wireless connectivity, and high-performance and low-power computing, including on-device artificial intelligence. Its segments include Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL) and Qualcomm Strategic Initiatives. QCT develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies, including radio frequency front-end, digital cockpit and advanced driver assistance and automated driving, Internet of things including consumer electronic devices, industrial devices and edge networking products. QTL grants licenses or otherwise provides rights to use portions of its intellectual property portfolio that includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Three Resilient Stocks to Consider
- Qualcomm's Market Performance: Qualcomm (QCOM) has seen a 23% decline in its stock price since early January; however, despite challenges from memory chip shortages, demand for its high-performance processors remains strong, and as memory manufacturers recover, Qualcomm is expected to increase shipments, improving market performance.
- Remitly's Growth Potential: Remitly Global (RELY) successfully facilitated $19.5 billion in transfers in Q3 last year, a 35% year-over-year increase, generating $419.5 million in revenue with EBITDA of $61.2 million, up 29%, and analysts expect this growth momentum to continue through 2028, showcasing its strong competitive position in the international payments market.
- The Trade Desk's Value Recovery: The Trade Desk (TTD) has been impacted by the overall market downturn, but its revenue is projected to grow by 16% in 2023, with a current P/E ratio of only 12 times, indicating investment value, as the market has yet to recognize its necessity.
- Market Environment Challenges: While the overall market faces uncertainty, stocks like Qualcomm, Remitly, and The Trade Desk demonstrate strong resilience, suggesting that investors may consider these potential stocks for long-term gains amid market volatility.
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- Significant Stock Drop: Cisco shares plummeted by as much as 12% on Thursday, marking the worst single-day decline since 2022, primarily due to rising memory prices exerting pressure on the company's margins, reflecting market concerns about its future profitability.
- Memory Shortage Impact: The global memory shortage, driven by strong demand for AI chips from Nvidia, poses challenges for Cisco as production costs soar, particularly with large data center memory orders limiting the production capacity for other devices, further exacerbating market uncertainty.
- Lackluster Financial Outlook: Although Cisco reported better-than-expected quarterly results, the stock still dropped about 7% due to the company issuing a mediocre forecast, indicating insufficient investor confidence in future growth prospects.
- Strategic Response Adjustments: CEO Chuck Robbins stated that Cisco will respond to rising memory prices by raising prices, revising contracts, and renegotiating terms, while CFO Mark Patterson emphasized controlling what can be controlled to mitigate cost pressures.
See More
Cisco Shares Plunge 12% Amid Margin Pressure from Rising Memory Prices
- Stock Plunge: Cisco shares fell 12% on Thursday, marking the largest single-day drop in four years, primarily due to rising memory prices exerting pressure on the company's margins, reflecting market concerns about its future profitability.
- Memory Shortage Impact: The global shortage of memory, driven by strong demand for AI chips, has skyrocketed component costs, affecting Cisco and other tech companies, including Apple and Dell, which are also feeling the pinch from increased expenses.
- Financial Response: CEO Chuck Robbins stated during the earnings call that Cisco will raise prices, revise contracts, and negotiate terms to adapt to evolving component prices, aiming to control what can be managed amid rising costs.
- Declining Gross Margin: Although Cisco reported better-than-expected quarterly results, its product gross margin fell to 66.4%, down 130 basis points from the previous year, highlighting the challenges the company faces in managing rising costs.
See More
2 Factors Making Qualcomm's Risk/Reward Profile Extremely Attractive
Qualcomm's Stock Performance: Qualcomm has experienced a significant decline in its stock price, dropping as much as 13% recently, marking one of its worst starts to the year, but has shown signs of recovery with four consecutive days of gains.
Investor Sentiment: Despite the recent downturn, investors appear to believe that the market has overreacted, as indicated by the stock's relative strength index (RSI) being historically low, suggesting potential for recovery.
Technical Analysis: The stock is currently considered extremely oversold, with analysts noting that similar conditions in the past have led to substantial recoveries, indicating a potential buying opportunity for investors.
Analyst Ratings: Several analysts have upgraded Qualcomm to a "buy" rating with price targets significantly above its current trading levels, suggesting strong upside potential and reflecting a growing bullish sentiment in the analyst community.
See More
Qualcomm: An AI Chip Investment Opportunity
- Market Outlook: Despite Qualcomm (QCOM) facing a 3.5% year-over-year revenue decline due to smartphone volume pressures, its rapid growth in the automotive and Internet of Things (IoT) sectors is expected to provide new revenue streams, alleviating short-term financial strain.
- Memory Chip Supply Constraints: The surge in demand for AI computing has led to rising memory chip prices, putting pressure on Qualcomm's revenue, a trend expected to persist until the end of 2026, impacting its fiscal 2027 performance.
- Long-Term Growth Potential: Qualcomm's strategic positioning in AI inference, particularly with its Snapdragon mobile processors, suggests a significant increase in demand as AI inference shifts from data centers to devices, driving substantial growth in the coming years.
- Investment Timing: With shares currently priced below $140 and a price-to-earnings ratio of just 12, despite facing short-term challenges, Qualcomm's long-term potential remains strong, presenting a compelling buying opportunity for patient investors.
See More
Edge Computing: The Next Big Opportunity in AI Revolution
- Market Growth Potential: Technavio forecasts that the global AI edge computing industry will expand at an average annual growth rate of nearly 32% through 2029, indicating a sustained increase in investment opportunities that will attract more companies to participate.
- Innovation-Driven Technology: The advent of AI-capable processors is broadening the application scenarios for edge computing, with emerging technologies like wearables and smart surveillance systems driving rapid development in this field, thereby enhancing the market competitiveness of related companies.
- Investment Opportunity Analysis: Major tech firms like Amazon and Alphabet are actively positioning themselves in edge computing, while smaller companies like Broadcom and Qualcomm may stand to gain more in this emerging market, particularly with Broadcom's Wi-Fi 8 technology enabling local machine learning processing.
- Industry Leader Outlook: Qualcomm CEO Cristiano Amon emphasizes that edge computing will represent the biggest opportunity of 2026, asserting that the winner in this space will determine the victor in the AI race, highlighting the significance of edge computing in future technological advancements.
See More
Three Resilient Stocks to Consider
- Qualcomm's Market Performance: Qualcomm (QCOM) has seen a 23% decline in its stock price since early January; however, despite challenges from memory chip shortages, demand for its high-performance processors remains strong, and as memory manufacturers recover, Qualcomm is expected to increase shipments, improving market performance.
- Remitly's Growth Potential: Remitly Global (RELY) successfully facilitated $19.5 billion in transfers in Q3 last year, a 35% year-over-year increase, generating $419.5 million in revenue with EBITDA of $61.2 million, up 29%, and analysts expect this growth momentum to continue through 2028, showcasing its strong competitive position in the international payments market.
- The Trade Desk's Value Recovery: The Trade Desk (TTD) has been impacted by the overall market downturn, but its revenue is projected to grow by 16% in 2023, with a current P/E ratio of only 12 times, indicating investment value, as the market has yet to recognize its necessity.
- Market Environment Challenges: While the overall market faces uncertainty, stocks like Qualcomm, Remitly, and The Trade Desk demonstrate strong resilience, suggesting that investors may consider these potential stocks for long-term gains amid market volatility.
See More
Cisco Shares Plunge Due to Rising Memory Prices
- Significant Stock Drop: Cisco shares plummeted by as much as 12% on Thursday, marking the worst single-day decline since 2022, primarily due to rising memory prices exerting pressure on the company's margins, reflecting market concerns about its future profitability.
- Memory Shortage Impact: The global memory shortage, driven by strong demand for AI chips from Nvidia, poses challenges for Cisco as production costs soar, particularly with large data center memory orders limiting the production capacity for other devices, further exacerbating market uncertainty.
- Lackluster Financial Outlook: Although Cisco reported better-than-expected quarterly results, the stock still dropped about 7% due to the company issuing a mediocre forecast, indicating insufficient investor confidence in future growth prospects.
- Strategic Response Adjustments: CEO Chuck Robbins stated that Cisco will respond to rising memory prices by raising prices, revising contracts, and renegotiating terms, while CFO Mark Patterson emphasized controlling what can be controlled to mitigate cost pressures.
See More
Cisco Shares Plunge 12% Amid Margin Pressure from Rising Memory Prices
- Stock Plunge: Cisco shares fell 12% on Thursday, marking the largest single-day drop in four years, primarily due to rising memory prices exerting pressure on the company's margins, reflecting market concerns about its future profitability.
- Memory Shortage Impact: The global shortage of memory, driven by strong demand for AI chips, has skyrocketed component costs, affecting Cisco and other tech companies, including Apple and Dell, which are also feeling the pinch from increased expenses.
- Financial Response: CEO Chuck Robbins stated during the earnings call that Cisco will raise prices, revise contracts, and negotiate terms to adapt to evolving component prices, aiming to control what can be managed amid rising costs.
- Declining Gross Margin: Although Cisco reported better-than-expected quarterly results, its product gross margin fell to 66.4%, down 130 basis points from the previous year, highlighting the challenges the company faces in managing rising costs.
See More
2 Factors Making Qualcomm's Risk/Reward Profile Extremely Attractive
Qualcomm's Stock Performance: Qualcomm has experienced a significant decline in its stock price, dropping as much as 13% recently, marking one of its worst starts to the year, but has shown signs of recovery with four consecutive days of gains.
Investor Sentiment: Despite the recent downturn, investors appear to believe that the market has overreacted, as indicated by the stock's relative strength index (RSI) being historically low, suggesting potential for recovery.
Technical Analysis: The stock is currently considered extremely oversold, with analysts noting that similar conditions in the past have led to substantial recoveries, indicating a potential buying opportunity for investors.
Analyst Ratings: Several analysts have upgraded Qualcomm to a "buy" rating with price targets significantly above its current trading levels, suggesting strong upside potential and reflecting a growing bullish sentiment in the analyst community.
See More
Qualcomm: An AI Chip Investment Opportunity
- Market Outlook: Despite Qualcomm (QCOM) facing a 3.5% year-over-year revenue decline due to smartphone volume pressures, its rapid growth in the automotive and Internet of Things (IoT) sectors is expected to provide new revenue streams, alleviating short-term financial strain.
- Memory Chip Supply Constraints: The surge in demand for AI computing has led to rising memory chip prices, putting pressure on Qualcomm's revenue, a trend expected to persist until the end of 2026, impacting its fiscal 2027 performance.
- Long-Term Growth Potential: Qualcomm's strategic positioning in AI inference, particularly with its Snapdragon mobile processors, suggests a significant increase in demand as AI inference shifts from data centers to devices, driving substantial growth in the coming years.
- Investment Timing: With shares currently priced below $140 and a price-to-earnings ratio of just 12, despite facing short-term challenges, Qualcomm's long-term potential remains strong, presenting a compelling buying opportunity for patient investors.
See More
Edge Computing: The Next Big Opportunity in AI Revolution
- Market Growth Potential: Technavio forecasts that the global AI edge computing industry will expand at an average annual growth rate of nearly 32% through 2029, indicating a sustained increase in investment opportunities that will attract more companies to participate.
- Innovation-Driven Technology: The advent of AI-capable processors is broadening the application scenarios for edge computing, with emerging technologies like wearables and smart surveillance systems driving rapid development in this field, thereby enhancing the market competitiveness of related companies.
- Investment Opportunity Analysis: Major tech firms like Amazon and Alphabet are actively positioning themselves in edge computing, while smaller companies like Broadcom and Qualcomm may stand to gain more in this emerging market, particularly with Broadcom's Wi-Fi 8 technology enabling local machine learning processing.
- Industry Leader Outlook: Qualcomm CEO Cristiano Amon emphasizes that edge computing will represent the biggest opportunity of 2026, asserting that the winner in this space will determine the victor in the AI race, highlighting the significance of edge computing in future technological advancements.
See More
