Qualcomm jumps as Wall Street is pleased with smartphone progress

Qualcomm (NASDAQ:QCOM) was in the spotlight on Thursday after the San Diego-based chipmaker offered up better-than-expected quarterly results and guidance and a new $15B buyback, resulting in considerable praise from Wall Street.

Shares rose 6.5% in premarket trading, while other chipmakers such as Broadcom (AVGO), Nvidia (NVDA) and AMD (AMD) were also higher.

UBS analyst Timothy Arcuri kept his Neutral rating on Qualcomm, but upped his price target to $190 from $185 as he was pleased to hear the Cristiano Amon-led company be “constructive” on the flagship portion of the smartphone market in China, similar to MediaTek.

“The mobile business continues to grow in a flattish overall unit market due to outsized exposure to the premium tier, while the adjacency story continues to gain momentum – with IoT particularly strong this Q,” Arcuri wrote in a note to clients. “The story continues to transform from a wireless communications supplier to one focused on leveraging its compute expertise for edge applications where power/performance is key.”

Separately, the November 19 investor day could help boost the stock in the near-term, Arcuri added.

J.P. Morgan analyst Samik Chatterjee tweaked his price target higher to $200 from $195 and kept his Overweight rating as he was “concerned” going into the results, but the flagship portion of the smartphone market and the growth in the non-smartphone market (like automotive) were pleasant surprises.

“Led by the stronger drivers, we are raising our revenue and earnings expectations for the company, and expect the IOT and Autos performance highlights to refocus investors on the long-term expectations around end-market diversification to be outlined by the company at the upcoming investor day, which has seen limited enthusiasm from investors till date given the focus on smartphone market drivers,” Chatterjee wrote.

Barclays analyst Tom O’Malley, who kept his Overweight rating and $200 price target on Qualcomm, pointed out that there is now a “bifurcation in Android between the high and low end” and Qualcomm is benefiting both in units and average selling price.

“We think the company is also seeing the weaker [Apple] units that the RF names wouldn’t admit to but oft [alluded] to into Q4,” O’Malley wrote. “We would note that earlier Android launches likely leave a more seasonal Q1 and expectations are still for modest unit growth into next year. Contributions from Auto/IoT are becoming more significant. This was much better than expected, and we think the analyst day serves as another AAPL clearing event with more positivity on adjacent businesses.”