UPDATE 1-Goldman Sachs upgrades Qualcomm to conviction buy

mercoledì 17 giugno 2009 15:13
 

June 17 (Reuters) - Goldman Sachs upgraded Qualcomm Inc (QCOM.O: Quotazione) to "conviction buy" from "neutral", saying the company's royalty business is substantially undervalued and a cyclical recovery in the market is expected for handsets.

The brokerage also raised its price target on the stock of the wireless chip supplier to $53 from $43.

Shares of Qualcomm were up 2 percent at $44.20 in trading before the bell. They closed at $43.45 Tuesday on Nasdaq.

Uncertainly surrounding the long-term growth of its royalty business is greatly diminished after the company published better-than-expected royalty rates for emerging fourth-generation technologies, the brokerage said, adding that royalties drive 60 percent to 80 percent of earnings per share for Qualcomm.

"With the near-term concerns now behind us, we expect the market to refocus on the value of the royalty business once Qualcomm completes its license negotiation with a top OEM, which we believe to be Samsung (005930.KS: Quotazione), over the next few months," analyst Simona Jankowski wrote in a research note dated June 16.

The brokerage said it also expects adoption opportunities for Qualcomm's Snapdragon chipset to expand as Microsoft Corp (MSFT.O: Quotazione) is likely to release a newer version of Windows for ARM-based netbooks.

Goldman raised its global handset unit growth forecast by 5 percent in 2009 and 12 percent in 2010, expecting replacement rates to rise sharply as the economy recovers. (Reporting by Manasi Phadke in Bangalore; Editing by Deepak Kannan)