Shares of semiconductor giant Qualcomm (QCOM -0.42%), which skyrocketed yesterday on news of a big earnings beat, maintained their momentum Friday with some help from Wall Street -- rising another 5% through 11:45 a.m. EDT.
At last report, a tally by TheFly.com had no fewer than five separate analysts raising price targets on Qualcomm stock yesterday, after the company reported a respectable 12% increase in revenues in its fiscal third quarter -- and a 76% raise in pro forma profits. One analyst -- Goldman Sachs -- even went ahead and upgraded Qualcomm stock to buy, with a $192 price target.
Today, the avalanche of applause continued, with DZ Bank upgrading Qualcomm shares to buy as well, and Jefferies & Co. hiking its price target (albeit to a more staid $160), reports StreetInsider.com.
Granted, SI didn't have a whole lot of detail on why DZ or Jefferies made their moves this morning -- but no matter. The analysts who endorsed Qualcomm yesterday did more than their fair share of talking.
Goldman Sachs was particularly verbose, highlighting Qualcomm's promise to grow earnings better than 20% next year as a good reason to own the stock, noting that the company's forecast was "double our ~10% forecast." The analyst pointed out that Qualcomm seems to be making a lot more money than anticipated from strong sales of "higher end Android phones" that bring in twice the royalty amount for Qualcomm per unit sold than the company gets from the sale of an iPhone.
What does that mean for Qualcomm stock in the coming year? Simply put: better profit margins.
In 2022, Goldman forecasts that operating profit margins at Qualcomm CDMA Technologies will jump to 33%, or 2 full percentage points better than the analyst expected -- especially strong performance in light of "a typical decline for QCT margin in the December quarter." And overall, Goldman believes investors can look for Qualcomm to put up "materially better margins in 2022 if Android momentum continues to improve."
No wonder investors are still cheering.