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Why Qualcomm Shares Slipped Today

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Qualcomm (NASDAQ: QCOM  ) fell 2% today after Piper Jaffray downgraded the mobile chipset giant from overweight to neutral.

So what: Along with the downgrade, analyst Auguste Gus Richard lowered his price target on the stock to $67 per share (from $71), representing about 3% worth of downside to yesterday's close. The stock has been on a nice run in recent months, but Richard's recent channel checks with foundry contacts (revealing production slowdowns), coupled with intensifying low-end foreign competition, suggest that Qualcomm is facing some headwinds that Wall Street is overlooking.

Now what: Richard doesn't expect the trend toward emerging markets sales to slow anytime soon. "MediaTek, the low-end Chinese OEM supplier, announced unit cell phone chipset shipments that were up 49% Q/Q and guided units up roughly 20% Q/Q," Richard cautioned Qualcomm investors. "We believe these datapoints point to an accelerating mix shift to the low-end that we believe will impact QCOM's royalty stream. Our below-consensus FY14 estimates anticipate this shift." Given Qualcomm's still-dominant competitive position, fortress-like balance sheet, and 2% dividend yield, however, I'd wait for more evidence of that trend before selling too big of a stake. 

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  • Report this Comment On September 28, 2013, at 8:25 PM, synergyvt wrote:

    The thing you miss here is that Qualcomm has essentially all of the 3G patents that there are to own and no matter who makes a 3G phone, they get royalties.

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Brian D. Pacampara, CFA

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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Related Tickers

11/25/2015 4:00 PM
QCOM $49.10 Down -0.31 -0.63%
Qualcomm CAPS Rating: ****