Owning a position in Qualcomm, Inc. (NASDAQ: QCOM) is "still worth the noise" as there are three paths for the stock to move as high as $120 per share under a bull-case scenario, according to Morgan Stanley.
Morgan Stanley's James Faucette maintains an Overweight rating on Qualcomm with a $95 price target.
The case for owning Qualcomm can be warranted amid three potential catalysts in the coming years, Faucette wrote in a note.
First, there is little indication Apple Inc. (NASDAQ: AAPL) will refresh its portfolio for 2019 launches but is likely to do so in late 2020. If Apple launches a 5G phone in late 2020, Qualcomm could supply 120 million 5G MSM units at $20 a piece in fiscal 2021. This would translate to $1.3 billion in revenue upside versus expectations.
Second, Huawei acknowledged its smartphone shipments could fall 40% in 2019 and rival smartphone makers could fill the void. Depending on geographies, pricing mix, share winners and other factors, Faucette said Qualcomm could see a 30 cent to 70 cent EPS benefit from royalty commitments at a time when contributions from Huawei will likely remain zero for the near term.
Third, Morgan Stanley's 5G benefit outlook through 2021 assumes an average selling price increase below the 20-25% uplift seen in the prior 3G to 4G cycle. It's likely the initial 5G cycle will consist of premium smartphone makers after, which Qualcomm will likely release a new version of its 5G modem.
Shares of Qualcomm were trading higher by 3.7% to $71.71 at time of publication.
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