January 21, 2009, 3:37 pm
Qualcomm: Morgan Stanley Launches With Cautious View
Posted by Eric Savitz
Morgan Stanley analyst Scott Coleman today launched coverage of Qualcomm (QCOM) with an Equal Weight rating and $41 price target, asserting that “near-term cyclical concerns” offset his positive long-term view of the stock.
Coleman writes in a research note that Qualcomm is the most leveraged play to mobile broadband, “a long-tailed theme that should create material value over time.” But for now, he adds, challenges in the handset market, including uncertainty around the length of an inventory correction, the potential for consumers to trade down to cheaper phones and a lengthening replacement cycle suggest caution on the shares.
For the September 2009 fiscal year, Coleman sees revenue of $9.7 billion and profits of $1.90 a share, below guidance of $10.2 billion to $10.8 billion and $2 to $2.10 a share. The key difference, he says, is a “more cautious view of lengthening replacement cycles in mature markets, a steeper inventory workdown and the impact of weakening geographic mix on handset average selling prices.”
Before turning more bullish, Coleman writes, he’d like to see signs of a bottoming in handset fundamentals, reduced 2009 revenue expectations and evidence that aggressive subsidies and 3G demand will overcome softer handset fundamentals.
QCOM today is up $1.22, or 3.6%, to $35.36.
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