Qualcomm in focus as JP Morgan cuts price target ahead of Q4 results

Qualcomm (NASDAQ:QCOM) was in focus on Tuesday as investment firm J.P. Morgan cut its price target on the semiconductor company ahead of its fiscal fourth-quarter results, citing concerns about the smartphone market.

Shares rose 0.5% in premarket trading.

“Qualcomm is challenged by the lack of recovery in the smartphone market, which is driving the strength in the smartphone component supply chain in 1H24 led by inventory refill by Chinese smartphone OEMs to fade in the second half of the year,” analyst Samik Chatterjee wrote in a note to clients.

“The smartphone industry challenges aside, Qualcomm faces specific challenges in relation to lapping loss of revenue to Huawei, while adoption of both AI PCs as well as AI Smartphones remain at a modest pace for now.”

Chatterjee kept his Overweight rating on Qualcomm, but lowered his price target to $195 from $210.

Despite the concerns about the aforementioned markets, fourth-quarter estimates for Qualcomm are likely to be “less impacted” as some are conservative, though revenue estimates for fiscal 2025 may be impacted as the company loses Huawei revenue and growth is limited to a mid-single digit pace, Chatterjee said.

“The moderation in our growth forecasts for FY25 leads us to now expect downside to consensus FY25 EPS expectations of about -6%, leading us to expect downside from the upcoming print even though the recent pullback in the stock has set up a more de-risked valuation multiple for the shares,” Chatterjee added.

There’s also the concern about the loss of its business from Apple (AAPL), which is expected to occur over the next two to three years as Apple switches to an internal modem chip, Chatterjee said.

A consensus of analysts expects Qualcomm to earn $2.57 per share on $9.93B in revenue for the coming quarter.