Amidst uncertainty in the chip market, Qualcomm (QCOM) received two votes of encouragement today, from Lazard Capital‘s Ian Ing and Credit Suisse’s Kulbinder Garcha.
Garcha, who has an Outperform rating on the stock, and a $75 price target, writes that Qualcomm is “the highest quality business model in the telecom equipment sector in our view.”
The company’s patent licensing business, “QTL,” should see revenue growth of 15% this fiscal year ending September and 18% next year, which he describes as “robust.”
The chipset business, “QCT,” probably saw a 10% drop in revenue last quarter, on a 5% drop in chipset volume, to 145 million units, but Garcha is not too worried, as he thinks the issues there indicate nothing fundamentally wrong with the company:
Negative newsflow at handset vendors including Research in Motion (RIMM), Nokia (NOK) and HTC (2498TW) has weighed on shares recently, though we view these as mainly vendor specific issues given potential gains at Samsung and also reflect a pronounced seasonality around product launches that are 2H12 weighted (Galaxy S III and iPhone 5). Issues with the ramp of 28nm production have also been a concern for investors, however we believe Qualcomm can close the supply/demand gap by early 2013.
Ing, reiterating a Buy rating and a $74 price target, also likes the stock as “Android smartphones rapidly displace China feature phones and North America completes a pause ahead of strong product cycles.”
The imminent arrival of Apple‘s (AAPL) next iPhone this fall could help boost September-quarter chipset sales to 151 million units from what he thinks was 148 million last quarter:
We think suppliers of AAPL are being pushed to potentially deliver component run rates well above recent iPhone peaks (>35mil units/q). Our estimate of a 3M sequential MSM increase in September is constrained given our belief that preparation for the Apple supply chain alone accounts for 4M in upside.
Qualcomm shares today rose $1.25, or 2%, to $54.98.
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