J.P. Morgan analyst Samik Chatterjee on Thursday placed Qualcomm shares on the firm’s “Negative Catalyst” watch list, although he maintains his Overweight rating on the stock with a $170 target price.
The analyst suggests that the recent optimism about a pickup in phone sales may be a little misplaced. “We are yet to see any significant change in the fundamentals of the smartphone market with the recovery expected to remain muted in 2024.” he writes in a research note. And Chatterjee adds that recent data on the China smartphone market raise concerns about the strength of the expected recovery.
Chatterjee says March quarter revenue appears to be tracking to $9.5 billion, above the midpoint of Qualcomm’s guidance range and Street consensus as tracked by FactSet, both at $9.3 billion. But he thinks June quarter guidance will be about in line with the Street at $9.1 billion, which he doesn’t think will be enough for investors.
“The muted upside in the market drivers, despite the strong performance for the shares, will likely challenge the short-term share price reaction,” he writes. “It is important to acknowledge that we do not expect downside to earnings forecasts, and the primary driver of the challenged setup is the premium valuation.”