Investing.com - Bernstein SocGen Group downgraded Qualcomm (NASDAQ:QCOM) to Market Perform from Outperform and cut its price target to $140 from $175. The stock currently trades at $130.35, down 23% year-to-date and 37% below its 52-week high of $205.95.
The firm cited building memory headwinds in the industry that appear likely to have a negative effect on overall smartphone shipments, with potential for double-digit unit declines this year. The analyst said the sell-side has mis-modeled the Apple roll-off.
Bernstein said numbers now appear much too high and potential narrative tailwinds such as buyback and datacenter day are probably not enough to offset the current situation amid weak smartphones. The firm also pointed to potential narrative headwinds including risk associated with expiration of the Apple license agreement in a year and Samsung share dynamics.
The analyst noted that while bears have pointed to headwinds from the Apple roll-off and smartphone exposure, the firm had believed the Apple situation was well-telegraphed and well understood by the buyside. Bernstein had thought the AI content opportunity in Android was not fully appreciated and had liked the longer term diversification story.
The firm said Qualcomm appears to be doing everything right but is living in a bad neighborhood at the moment. Bernstein suspects things get worse before they get better, and while the stock remains extremely cheap even on its numbers, that becomes less of a support when one can buy AI winners for under 15 times on realistic estimates. Trading at a P/E ratio of 26.6, InvestingPro analysis suggests the stock is undervalued with a Fair Value indicating 34% upside potential, placing it among undervalued opportunities in the semiconductor space.
In other recent news, Qualcomm announced a $20 billion share buyback program alongside an increase in its quarterly dividend from $0.89 to $0.92 per share, which will be effective for dividends payable after March 26, 2026. This move raises the annualized dividend payout to $3.68 per share. The new buyback program, effective immediately, supplements an existing program with $2.1 billion remaining and has no expiration date. Meanwhile, Seaport Global Securities downgraded Qualcomm's stock rating from Neutral to Sell, citing concerns over a potential 10%-15% drop in mobile phone volumes due to increased memory prices. Additionally, BofA Securities assumed coverage of Qualcomm with an Underperform rating, projecting sales and earnings growth of only 2% and 1% respectively for 2025-2028. Qualcomm is also identified by Wolfe Research as one of the companies with the highest activist attractiveness scores, indicating vulnerability to shareholder engagement. These developments highlight both strategic financial moves by Qualcomm and the challenges it faces in the market.