-- Qualcomm (QCOM) guided for handset volume below seasonal demand for the second consecutive quarter, citing memory impact on the China Android segment, Morgan Stanley said in a note Thursday, adding that handset growth remains a major challenge as 5G continues to mature.
The company said June would likely be the bottom for China Android, based on royalty data and customer conversations. However, due to share loss at Samsung and Apple (AAPL), it cannot determine whether handset sales will rise or drop in September, while Morgan Stanley models flattish sequential growth, according to the note.
Qualcomm guided for 50% year-over-year Automotive growth in June, about 7% ahead of Morgan Stanley's estimates, driven by both cyclical and pipeline growth, the firm noted. The brokerage said this remains a good growth story, although the segment accounts for less than 15% of total sales.
The company is now pursuing custom silicon chips but the market is saturated with big suppliers, according to the note. The firm said it needs more visibility into those wins but progress on this front is important.
Morgan Stanley now models 2026 revenue and EPS at $40.1 billion and $9.39, respectively, and 2027 revenue and EPS at $42 billion and $10.32.
Morgan Stanley maintained an underweight rating on Qualcomm, while raising its price target to $146 from $132.
Shares of Qualcomm rose nearly 16% in Thursday trading.
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