Contrary to some chatter that smartphone demand is waning, the market grew 50 percent year over year in the second quarter, and it has a lot more room to grow, according to Alex Gauna, analyst at Piper Jaffray.
The growth in emerging markets is particularly good. Gauna said the market is enormous and emerging markets will continue to be an attractive area for first-time, low-end smartphones and then upgrades. He points out that emerging markets is an area of rapidly growing discretionary income.
The best way to buy into the smartphone market, in Gauna’s opinion, is through the suppliers. He is positive on Skyworks, Universal Display and Qualcomm.
According to Gauna, shares of Qualcomm are undervalued and it’s a great time to buy. He offers a few reasons why he’s positive on the company. He said he expects Qualcomm to participate in a robust iPhone 5S cycle, the Nexus 7 tablet uses Qualcomm Snapdragon technology and 4G LTE market penetration is still expected to remain under 15 percent of global deployment this year. He also said Qualcomm is set up to be in all of the top 10 best-selling handsets this holiday season.
Last week Piper Jaffray downgraded Qualcomm on falling high-end smartphone demand.
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Disclosure: Gauna does not own the stocks mentioned.