Bernstein Maintains Neutral Rating on Qualcomm with Target Price 37% Below Current Level
Claire Weston
Bernstein's $140 target for Qualcomm sits nearly 40% below the stock's last close — Apple share loss, two straight years of earnings decline, and a data-center story still missing hard numbers.
Where does the $140 target come from?
The math is straightforward: FY2027 expected EPS of $9.77 × ~14x P/E = $140.
Qualcomm closed at $221.90 when the report was published. This means → Bernstein sees the stock as roughly 37% overvalued at current levels.
The rating stays at "Market-Perform." In plain terms = the analyst sees no compelling reason to buy or sell right now.
Data center: where are the real numbers?
Qualcomm has said its data-center business will reach "multi-billion-dollar" scale by FY2027, but Bernstein calls this too vague — no clear market boundary, no segment-level model.
Qualcomm is betting on low-cost inference — running trained AI models to serve end-user queries — but Nvidia, AMD, and major cloud providers are all building their own chips. This means → as a latecomer, Qualcomm faces a high bar to prove it can take share from entrenched rivals.
The market is also watching a rumored acquisition of Tenstorrent, an AI chip startup, as a potential shortcut to fill capability gaps. No official confirmation so far.
Why is the Apple share loss the biggest risk?
Apple's shrinking orders rank as the top structural risk, hitting Qualcomm on two fronts: fewer handset chips sold, and potential erosion of licensing revenue.
On the chip side: Apple share shifts plus rising memory prices will weigh on Android handset makers' near-term procurement.
On the licensing side (QTL): a key patent-licensing contract expires next April. The renewal outcome, along with the current state of Qualcomm's relationship with Huawei, remain unresolved variables. This reflects a fact the market sometimes overlooks — Qualcomm's profit does not come from chips alone; if the licensing line weakens, the impact runs deeper than headline revenue suggests.
Can auto and XR carry a new growth story?
Qualcomm's auto business already runs at an annualized rate above $5 billion. Analysts are pressing management on whether the ~$8 billion FY2029 target should be raised.
On XR — smart glasses, headsets, and related devices — Qualcomm's CEO has noted that smart-glasses shipments already number in the tens of millions. Bernstein thinks the $2 billion+ XR revenue target for 2029 may be too conservative.
In plain terms = large AI models increasingly depend on on-device computing power — phones, glasses, car systems all need stronger chips. That is a tailwind for Qualcomm, but how strong depends on what management reveals at Investor Day.
Why are earnings falling for two straight years?
Bernstein forecasts Qualcomm's adjusted EPS dropping two years running: FY2025 actual $12.03 → FY2026 estimated $10.64 → FY2027 down to $9.77 — a cumulative decline of roughly 19%.
This means → even with new business lines growing, the drag from Apple's departure and shifting business mix outweighs the gains — the new revenue is not yet enough to fill the gap.
On margins: as non-handset segments like data center grow in share, the trajectory of gross and operating margins remains unclear. Management has yet to quantify the specific margin hit from losing Apple volume.
What should investors watch at Investor Day?
On capital returns, Qualcomm recently spent $7.3 billion on buybacks and dividends — exceeding 100% of free cash flow over the same period — and announced a new $20 billion buyback program. Analysts question whether this pace is sustainable.
Data-center expansion costs money; aggressive buybacks cost money too. This means → the two priorities may crowd each other out, and management needs to clarify the trade-off.
The core test for June 24 Investor Day: whether management delivers a full financial-target model that includes the data-center segment. If the answer is another round of "multi-billion-dollar" generalities, the market is unlikely to give credit.
Content is for reference only, not financial advice.