Technology

Why Qualcomm Is Struggling to Find Friends on Wall Street

Chris Lange

Published: January 26, 2017 12:15 pm

Last Updated: January 12, 2020 3:28 pm

When Qualcomm Inc. (NASDAQ: QCOM) reported first-quarter fiscal 2017 results late on Wednesday, the reaction was not entirely positive. However, there are other factors in play here. Currently Qualcomm is involved in a lawsuit with Apple Inc. (NASDAQ: AAPL) that has been dragging down its shares over the past week.

24/7 Wall St. has included some highlights from the earnings report, as well as what a few analysts are saying after the fact.

The chipmaker posted adjusted diluted earnings per share (EPS) of $1.19 and revenues of $6 billion. The consensus analysts’ estimates had called for EPS of $1.18 and $6.12 billion in revenue. In the same period of the previous fiscal year, Qualcomm reported EPS of $0.97 on revenues of $5.8 billion.

Apple recently filed suit against Qualcomm in the United States and China over patent licensing royalties. Apple is perhaps the biggest single customer of Qualcomm, and any disruption in this business for Qualcomm is not good news.

Analysts are saying that Qualcomm is able to charge roughly five to 10 times more than what other mobile patent holders can. This resulted in pretax revenues of $6.5 billion for Qualcomm’s previous fiscal year in just royalties.

Obviously, analysts had something to say about the chipmaker.

Merrill Lynch maintained its Buy rating for Qualcomm with a $68 price objective. The brokerage firm commented in its report:

Qualcomm reported 1Q results/2Q guidance mostly in-line with expectations; modest licensing strength offset semi softness. Management addressed the Apple lawsuit and regulatory pressures, defending its licensing model and patent leadership. We remain positive on NXP, valuation, but note potential for Apple-related risk in the second half of 2017.

A few other analysts weighed in on Qualcomm after earnings as well:

• Cowen has an Outperform rating and lowered its price target price to $73 from $74.
• Instinet has a Neutral rating and lowered its price target to $65 from $70.
• Morgan Stanley lowered its price target to $60 from $65.
• Pacific Crest has an Overweight rating but lowered its price target from $83 to $81.
• RBC cut its price target to $60 from $70.

Shares of Qualcomm were last seen down over 5% at $53.83, with a consensus analyst price target of $69.46 and a 52-week trading range of $42.24 to $71.62.