Morgan Stanley’s Ehud Gelblum today reiterates an Overweight rating on shares of Qualcomm (QCOM), while raising his price target to $78 from $65, writing that average selling prices of 3G phones from which Qualcomm derives licensing and royalty revenue may end up higher than people expect.
“We believe 3G ASPs can continue to surprise on the upside in FY12 and FY13 as we expect the launch of LTE devices to keep ASP stable at the high-end,” writes Gelblum, “while the substitution of 3G feature phones by entry-level smartphones likely limits downward ASP pressure at the low-end.”
What’s more, Qualcomm’s sales of its own chipsets may get a boost because prices for chips supporting so-called long term evolution, or LTE, cellular broadband can be much higher, he observes:
Third parties estimate the cost of the QCOM 4G chip in the New iPad to be at least 50% higher than the cost of the QCOM 3G chip in the iPad2. QCOM also expects close to 1/3rd of its chipments to be LTE by September, driven by a surge in LTE smartphone launches in the next six months, including, we expect, the next iPhone.
Gelblum raised his estimate for each of the next two fiscal quarters, thus raising the fiscal year ending this September to an estimated $19.59 billion from a prior $19.12 billion. That’s ahead of the Street consensus of $19.4 billion.
For 2013, he raised his estimate to $23.6 billion, a whopping $1.76 billion increase. That’s above the average $21.78 billion the Street is estimating.
Gelblum lifts his EPS estimate to $3.85 from $3.75 for this year, and for next year, to $4.50 per share from $4.23. That compares to the Street averages of $3.76 and $4.20, respectively.
Previously: QCOM: Bernstein Articulates, Counters the Bear Case, March 26th, 2012.
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