Analyst Raises Apple, Qualcomm Price Targets on 5G Boom

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With 5G mobile networks set to be built out over the next few years, both Apple Inc. (NASDAQ: AAPL) and Qualcomm Inc. (NASDAQ: QCOM) have received a $5 per share boost in their price targets from analysts at Canaccord Genuity. Both companies’ stocks are Buy-rated, and the analysts raised Apple’s price target to $150 and Qualcomm’s to $180 per share.

Analysts T. Michael Walkley and Daniel J. Park expect iPhone sales to post a double-digit increase year over year in Apple’s 2021 fiscal year ending in September. Canaccord’s analysts also expect Apple’s other hardware products and services sales to rise by double digits as well.

But it’s the upgrade cycle for the iPhone 12 that drives their outlook for both Apple and Qualcomm, the modem chip supplier for Apple. Walkley and Park forecast iPhone sales for calendar year 2021 at 233 million and 244 million for 2022. The totals represent an increase of 10 million units each year. Revenue estimates from iPhone sales have been lifted from $173 billion to $173.9 billion for 2021 and from $173.9 billion to $175.7 billion in 2022.

The analysts note that “Apple is outperforming its competitors across all hardware categories, and the strong ecosystem is leading to a very loyal customer base buying more hardware products and using more services.”

Qualcomm’s outlook for 2021 and 2022 also rests heavily on the 5G upgrade cycle. The company currently counts more than 110 licensees of its 5G technology, and the Canaccord analysts expect Qualcomm’s high-margin licensing business to “benefit from 5G smartphone growth trends.”

While Apple is developing its own modem chips, the analysts cite Apple’s “multi-year sourcing agreement” with Qualcomm and expect Qualcomm’s substantial lead in modem technology to “remain well ahead of Apple’s 5G modem efforts for several years.” In fact, Walkley and Parker say, they “anticipate Qualcomm will likely be shipping its fourth or even fifth generation or sixth generation 5G modems by the time Apple has a potential 5G modem for [its] smartphones.” They also note that “Qualcomm is well-positioned to support Apple for at least the next several years and [we] believe the separate licensing deal extends for at least 5 more years and that deal continues even if Apple insources its modems.”

Canaccord has raised its estimates of Qualcomm’s technology segment revenues for this year from $23.8 billion to $25.9 billion and for 2022 from $24.3 billion to $26.5 billion. Adjusted earnings estimates also have been increased from $7.26 per share to $7.93 in 2021 and from $7.39 to $8.20 in 2022.

Wednesday morning, Apple shares traded down less than 2% to $128.85, in a 52-week range of $53.15 to $138.79. The consensus price target is $129.05.

Qualcomm traded down fractionally, at $151.18 in a 52-week range of $58.00 to $161.07. The consensus price target is $164.74.

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