Qualcomm: Analyst Opinions Split, But Upside Potential Remains

Key Points

• Analysts are split, with Buy ratings and Underweights both issued last week.
• Qualcomm trades at just 12x earnings, far lower than peers like NVIDIA or AMD.
• Shares are up since last week's dip but are still 6% below pre-report levels.

Qualcomm Inc. NASDAQ: QCOM closed just under $140 last Friday, continuing its modest rally after the post-earnings dip.

Shares are still down around 6% from where they were before last week's report, despite the company beating analyst expectations on both headline figures.

That's a tough pill for investors, especially when the numbers were solid.

But the tepid response isn't just about the earnings. It reflects a broader indecision in the market about the tech giant's long-term positioning. Some analysts remain steadfast bulls, pointing to Qualcomm's expanding presence in high-growth verticals like automotive and AI.

Others view the company as a laggard among semiconductor names, facing ongoing challenges in China and declining Apple-related revenue.

Some Analysts Are Hot

The recent analyst commentary sums this up well. Last week alone, Rosenblatt Securities, Benchmark, and Robert Baird all reiterated Buy or equivalent ratings on the stock. Baird, in particular, issued a price target of $216. From Friday's closing price of $139, that implies a hefty 55% potential upside. Rosenblatt and Benchmark also cited strong revenue beats and ongoing strength in Qualcomm's core end markets.

Benchmark slightly lowered its target to $200 from $240, noting that the company delivered close to $200 million in upside to revenue forecasts for the March quarter. But the team there also pointed out broad-based demand across all of Qualcomm's key segments.

While there may have been some minor benefit from Apple-related pull-ins, Benchmark maintained confidence in the broader growth narrative. Their only reservation was the multiple compressions seen across the chip sector, which forced a modest target revision.

Some Analysts Are Cold

At the same time, others on Wall Street remain unconvinced. Wells Fargo, for example, maintained its Underweight rating and cut its price target to $140, citing mounting concerns about China exposure and the slow attrition of Apple revenue. They emphasized the importance of watching June-quarter bookings, particularly for any shifts in handset-related demand or Apple's business share.

Likewise, Cantor Fitzgerald and Loop Capital each took more cautious stances, rating Qualcomm as Neutral and Hold, respectively. That said, even these more conservative voices set price targets above the current trading level, suggesting that while near-term concerns remain, the downside from here may be limited.

Valuation Remains an Attractive Anchor

One reason Qualcomm continues to draw support from bulls is its relative valuation. With a price-to-earnings ratio of just 14, the stock trades at a deep discount compared to peers. NVIDIA Corp's NASDAQ: NVDA P/E sits at 38, while Advanced Micro Devices Inc's NASDAQ: AMD ratio is almost 100. Even for investors with only moderate growth expectations for Qualcomm, the valuation case alone makes it a tempting prospect.

That said, valuation is not a catalyst in itself. The market is clearly looking for more convincing signs of a turnaround in demand and a clearer growth story beyond smartphones. Some hesitation is understandable with modest guidance for Q3 and continued geopolitical risk surrounding China.

Earnings Underscore Broader Strength

Let's not forget what Qualcomm just delivered. EPS of $2.85 beat consensus by $0.04, while revenue of $10.98 billion marked a nearly 17% year-over-year increase. Handset sales rose 12%, automotive revenue surged 59%, and IoT sales jumped 27%. These numbers aren't just decent—they're strong, particularly in a choppy macro environment.

Qualcomm also returned impressive amounts to shareholders via buybacks. This and a recent dividend hike reflect management's confidence in the company's long-term health. 

Long-Term Growth Drivers Support Qualcomm’s Investment Case

Investors are faced with a frustrating but not uncommon dilemma: strong numbers, low valuation, and decent analyst support, yet a market that's still lukewarm. The split analyst reaction captures this perfectly. Some are calling for massive upside, others are still worried about China, Apple, and cyclical handset risks.

The good news? Qualcomm doesn't need to be perfect to outperform from here. At 12x earnings, with solid long-term growth drivers and strong operational results, there's a lot to like. But make no mistake: there are still cleaner stories out there right now. For those comfortable with a bit more uncertainty in exchange for deep value and upside optionality, Qualcomm may be worth the bet.