Qualcomm is moving from making wireless chips mostly for smartphones to making them for a host of devices for the Internet of Things, or IoT. For that reason, Qualcomm stock deserves a higher valuation, a Wall Street analyst said Friday.
"Investors continue to assign a handset multiple to the stock, but in reality, we feel Qualcomm is set to capitalize on an already proliferating IoT opportunity," Piper Sandler analyst Harsh Kumar said in a note to clients. Kumar rates Qualcomm stock as overweight, or buy, with a price target of 225.
On the stock market today, Qualcomm stock rose 0.8% to 153.99. Qualcomm stock notched a record high 193.58 on Jan. 5 before the stock market correction.
Qualcomm is one of the few chipmakers that can address the sophisticated computing and connectivity requirements of IoT devices in a range of unit volumes, Kumar said.
The San Diego-based company also has significant opportunities in the automotive and personal computer markets, he said.
Analyst Pounds The Table For Qualcomm Stock
Meanwhile, Qualcomm is doing well selling chips for premium Android smartphones from Samsung and Chinese vendors, Kumar said. Those customers are making up for the shortfall created when Apple decided to make its own wireless chips for the iPhone.
Qualcomm stock is an attractive investment despite macroeconomic uncertainty, because of its exposure to the Internet of Things, Kumar said. "We are pounding the table and reiterating our overweight rating on Qualcomm," he said.
On Feb. 2, Qualcomm delivered a beat-and-raise quarterly report. On a year-over-year basis, Qualcomm earnings rose 49% while sales climbed 30% in its fiscal first quarter ended Dec. 26.
For the current quarter, Qualcomm forecast adjusted earnings of $2.90 a share, up 53%, on sales of $10.6 billion, up 34%.
Qualcomm stock ranks 10th out of 30 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 90 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
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