Credit Suisse Regains Confidence In Qualcomm, Raises Price Target To $70

QUALCOMM, Inc. (NASDAQ: QCOM) reported its F3Q16 results ahead of expectations and its guidance appears conservative, Credit Suisse’s Kulbinder Garcha said in a report. He maintained an Outperform rating on the company, while raising the price target from $67 to $70.

Qualcomm reported its quarterly revenues at $6.0bn, ahead of the consensus expectation of $5.6bn, and its EPS at $1.16, above the consensus of $0.97. “While part of the beat came in from the catch-up payments to QTL (from both LG and within China), we believe ongoing Chinese compliance could sustain this,” analyst Kulbinder Garcha wrote.

QCT Performing Better Than Expected

QCT revenues came in at $3.9bn, representing 15 percent sequential improvement. “Management sounded confident regarding the roadmap, and pointed to the recent strength in China. In addition, we believe the company's guidance on QCT margins already includes a potential loss at Apple,” Garcha mentioned.

The analyst expects QCT margins to continue improving. This, along with compliance in China, should enable Qualcomm to achieve a long-term EPS of ~$5.60.

Infection Point

“With a material EPS beat (~16%) and a return to EPS growth, we see that company now delivering an inflection in fundamentals,” Garcha commented. The EPS estimates for FY16 and FY17 have been raised from $4.17 to $4.32 and from $5.03 to $5.21, respectively.

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