On Tuesday, an HSBC analyst increased the price target for Qualcomm Inc (NASDAQ:QCOM) shares to $190 from the previous $170, while reaffirming a Buy rating on the stock. The adjustment reflects an optimistic outlook on the company's financial performance, particularly regarding its earnings per share (EPS) for fiscal years 2024 and 2025.
The analyst's decision is based on anticipated improvements in profit margins, driven primarily by a higher proportion of premium smartphone System on Chips (SoCs) in Qualcomm's product mix. This adjustment has led to revised EPS estimates for fiscal years 2024 and 2025, which are now 2% and 9% above the consensus, respectively.
The new price target of $190 is the result of applying a forward price-to-earnings (PE) multiple of 16 times to the estimated EPS of $11.73 for fiscal year 2025. This calculation is part of the rationale behind the analyst's continued endorsement of Qualcomm as a Buy.
The optimism surrounding Qualcomm's stock is further justified by the company's competitive edge in its flagship SoCs. The analyst also cites Qualcomm's long-term growth potential stemming from its diversification strategy and expansion into non-smartphone segments as reasons for the positive rating. These factors combined suggest a strong performance outlook for Qualcomm in comparison to its competitors.
InvestingPro Insights
In light of the recent HSBC analyst upgrade, it's worth noting that Qualcomm Inc (NASDAQ:QCOM) stands out for its consistent financial stewardship and market position. According to InvestingPro data, Qualcomm has a robust market capitalization of approximately $188.97 billion and maintains a healthy Price/Earnings (P/E) ratio of 22.1 based on the last twelve months as of Q1 2024. Furthermore, the company has demonstrated a solid dividend track record, raising its dividend for 21 consecutive years, which is a testament to its financial reliability and commitment to shareholder returns.
InvestingPro Tips highlight Qualcomm's status as a prominent player in the Semiconductors & Semiconductor Equipment industry and its ability to keep debt at moderate levels while ensuring liquid assets surpass short-term obligations. These financial health indicators reinforce the positive sentiment expressed by the HSBC analyst. Additionally, with a dividend yield of 2.01% and a recent 13.33% dividend growth, Qualcomm's investment appeal is further accentuated for income-focused investors.
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