Morgan Stanley Sees Muted Near-Term Expectations For QUALCOMM

In a report published Thursday, Morgan Stanley analyst James E. Faucette reiterated an Equal-Weight rating on QUALCOMM (NASDAQ: QCOM).

In the report, Morgan Stanley noted, “Management reported that it now expects a negative outcome from the China's NDRC (National Development and Reform Commission) investigation related to Chinese Anti-Monopoly Law. However, the company is unable to determine what negative outcomes could be—ranging anywhere from fines to mandated changes in business practices.

"While that process works its way out, QUALCOMM is finding it more difficult to both collect royalties from existing licensees,as well as sign up new licensees. The net result is that we,and the company, are reducing our assumptions on increased royalty collections associated with the China market. While that blunts one of the key bull cases on the company, we expect that ultimately QUALCOMM will resolve the collectability issue,and in turn preserving our estimated $6.50-$7.0 in annual handset-driven earnings power. If the NDRC were to do something that permanently impaired collectability for QUALCOMM, we would view that as an incremental negative for the stock.”

QUALCOMM closed on Wednesday at $81.60.