On Monday, Melius Research initiated coverage on shares of Qualcomm (NASDAQ:QCOM) with a Hold rating, setting a price target of $180.00. The firm recognized Qualcomm as a leading intellectual property innovator in the mobile sector since the 1990s.
With a substantial market capitalization of $177 billion and a GOOD Financial Health Score according to InvestingPro, the company maintains a strong market position. However, they anticipate the company to face several challenges in the near future.
Qualcomm, known for its influential role in the development of mobile chipsets, is now expected to see its revenue growth decelerate. While the company achieved 8.77% revenue growth in the last twelve months, according to Melius, revenue is projected to slow from high single digits to just 3% over the coming two years. This forecast falls significantly below the mid-teens average of its comparative group, which is entering an AI-driven growth cycle.
The price target of $180 is based on approximately 14 times Melius' fiscal year 2027 earnings per share (EPS) estimate of $12.52 for Qualcomm. Currently trading at a P/E ratio of 17.47x with projected EPS of $11.26 for FY2025, InvestingPro analysis suggests the stock is slightly undervalued.
Despite the company's solid history and attractive valuation multiple, the analyst firm believes that Qualcomm is entering a period of slower growth relative to its peers.
Melius' assessment reflects a cautious outlook on Qualcomm's near-term prospects. The lower-than-average revenue growth projection and the resulting conservative price target underscore the headwinds Qualcomm may face in comparison to its competitors in the technology sector.
The newly established price target and Hold rating by Melius Research provide investors with a tempered expectation for Qualcomm's performance in the face of evolving market conditions and technological advancements.
In other recent news, Qualcomm has been maintaining a positive outlook from analysts due to its strategic diversification plans. TD Cowen reiterated a Buy rating, highlighting Qualcomm's potential growth in the automotive sector and its advancements in artificial intelligence (AI).
On the other hand, Susquehanna reduced its price target for Qualcomm shares but maintained a positive stance, expressing confidence in Qualcomm's transition to a more diversified semiconductor player.
Recently, Qualcomm reported non-GAAP revenues of $10.2 billion and earnings per share of $2.69. The chipset segment contributed $8.7 billion in revenues, while the licensing segment brought in $1.5 billion. Record revenues of $899 million were reported in the automotive market.
Qualcomm has unveiled a strategy to target a total addressable market of approximately $900 billion by 2030, with significant growth expected in the automotive, IoT, PC, industrial, and extended reality sectors.
Despite facing challenges in the mobile market, the company's diversification efforts have been recognized by various firms such as Cantor Fitzgerald, UBS, and Loop Capital, all of which maintained a Neutral rating on Qualcomm shares. These are the recent developments from Qualcomm.
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