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Shares of Qualcomm (NASDAQ:QCOM) are down more than 2.5% in pre-market Monday after Wells Fargo analysts downgraded to Underweight from Equal Weight.
They also reiterated a $105 per share price target on QCOM stock, which implies a downside risk of nearly 12% relative to Friday’s closing price. The QCOM downgrade comes after the analysts cut Qorvo (NASDAQ:QRVO) and Skyworks (NASDAQ:SWKS) in October to reflect negative investor sentiment toward the chip sector.
Until “investors are convinced we’ve reached a trough in the chip cycle, we believe shares of companies w/high smartphone exposure should underperform the broader chip sector,” they said in a client note.
Moreover, they see QCOM trading at a discount to peers as it operates in the “no-growth mobile handset market”, as well as because “investors may begin to value QCOM shares based on EPS power ex. MSM/RFFE shipments to AAPL (our FY25 est. assumes decreasing AAPL QCT rev).”
Moreover, the analysts are also not very positive on the mid-term outlook for Qualcomm as its success beyond the iPhone 16 is dependent on the high-end Android smartphone community, “which may not be the best exposure to have,” they added.
Qualcomm stock is down nearly 35% year-to-date.
