Qualcomm cut at Daiwa on more muted outlook

Daiwa Capital Markets downgraded shares of Qualcomm Incorporated (NASDAQ:) to Outperform from Buy in a note Wednesday, maintaining a $125 price target on the stock.

The firm told investors that the company now has a more muted outlook following its earnings release on August 2.

The company posted Q3 earnings of $1.87 per share, $0.06 better than the analyst estimate of $1.81. However, revenue for the quarter came in at $8.44 billion, below the consensus estimate of $8.51 billion.

“The issues of prior quarters remain; China not seen a rebound, overall consumer demand is weak, high inventory levels and Apple (NASDAQ:) bought product more heavily earlier in the year,” the note said.

“Add to this going forward as Huawei starts shipping 5G phones, Qualcomm does not have a license here for 5G, only with 4G, thus will lose about $1B in recurring revenue.”

While Daiwa still views the business as having long-term growth potential, especially from Auto and IoT, it notes that near-term Auto is only 6% of QCT revenue.

“IoT is larger at ~20%, but needs the consumer and macro to rebound,” it added, stating that the company has a “tough growth year ahead.”