Why Qualcomm Might Be Poised to Pull Back

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  ) slipped as much as 2.5% today after Bank of America downgraded the chipmaker from buy to neutral.

So what: Along with the downgrade, analyst Tal Liani reaffirmed his $75 price target, representing about 10% worth of upside to Friday's close. Qualcomm shares have rallied nicely in recent months on solid sales growth, but Liani thinks that weakness in the smartphone space could serve as a significant headwind for the company going forward.

Now what: Over the next two years, BofA expects Qualcomm's quarterly revenue growth to decline from 29% to 6%, and earnings per share to drop from 22% to 2%. "Our handset model, updated this morning, is pointing to a sharp deceleration in the Smartphone market value growth from 32% in 2013 to 10% in 2015, with a profound impact on royalty revenue growth and even a greater impact on EPS," cautioned BofA. Of course, when you consider Qualcomm's rock-solid financial and competitive position, patient investors might want to look at the recent pullback as a potential long-term entry point. 

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Related Tickers

9/28/2016 10:18 AM
QCOM $63.59 Up +0.28 +0.44%
Qualcomm CAPS Rating: ****
BAC $15.30 Up +0.01 +0.03%
Bank of America CAPS Rating: ****