Qualcomm Inc. (NASDAQ:QCOM) shares are trading lower Tuesday following a downgrade from KeyBanc.
What To Know: KeyBanc analyst John Vinh downgraded Qualcomm from Overweight to Sector Weight on Tuesday, citing headwinds primarily from Apple Inc.'s (NASDAQ:AAPL) gradual shift to its own internal modem.
"Our supply chain work has confirmed that Apple will begin to ramp its internal modem in stages over the next several years," Vinh said in the note.
The KeyBanc analyst expects this transition to increasingly affect Qualcomm's earnings over the coming years, with an estimated earnings impact of $1.55 to $1.65 per share as Apple moves away from using Qualcomm's modems. Vinh noted that this shift could create an overhang for Qualcomm's stock until the full financial impact is reflected in its earnings.
Vinh also highlighted that Qualcomm is likely to face intensified competition from Mediatek in the mid-to-low-end smartphone market. He pointed out that increasing price competition in the segment could lead to a loss of market share, further compounding the challenges posed by Apple's modem transition.
The analyst expects these competitive pressures to serve as a significant headwind for Qualcomm in the first half of 2025. KeyBanc has lowered its estimates accordingly.
Furthermore, Vinh noted that Qualcomm's positioning as an edge AI player has not materialized in key markets like handsets and PCs.
"We don't foresee QCOM benefitting from a replacement cycle fundamentally or being given a market premium as an edge AI beneficiary until that happens," Vinh said.
KeyBanc has a fair value price of $167 on Qualcomm shares, based on a 15-times multiple on full-year 2025 earnings estimates of $10.89 per share.
QCOM Price Action: Qualcomm shares were down 0.84% at $165.57 at the time of writing Tuesday, according to Benzinga Pro.
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