It's an absolute lovefest with Qualcomm (QCOM) on Wednesday. I counted no less than 10 upgrades and/or price target raises across Wall Street.
Cannaccord Genuity raises PT to $89
Raymond James raises PT to $85
Susquehanna raises PT to $95
Mizuho Securities raises PT to $82
Macquarie raises PT to $85
Barclays raises PT to $100
J.P. Morgan upgrades to Overweight, raises PT to $88
Stifel upgrades to Buy, raises PT to $100
Evercore ISI upgrades to Outperform
Cowen raises PT to $91
BofA/Merrill raises PT to $71
Really BofA? Granted they've been "Neutral" on the stock and remained that way even after the news from the past two days. I don't know about you, but if my price target is $71 and the stock is trading around $80, I have to think either that should be an "Underperform" rating or I really need to re-evaluate my rating system.
All of this stems, of course, from the news on Tuesday that Qualcomm and Apple (AAPL) agreed to drop all litigation between the companies. In return, Qualcomm will receive a payment from Apple along with a six-year licensing agreement to boot.
If that weren't enough, Intel (INTC) announced they are exiting the 5G smartphone modem business. Honestly, the second part meant more to me than the first part. Intel is essentially conceding the race to 5G to Qualcomm at this point.
Even before this, it wasn't as if Qualcomm was doing terrible. Last quarter was strong and guidance fell in line with expectations. While I don't know that we'll see material changes to guidance in the second or third quarters, I expect either the fourth quarter or first-quarter 2020 is going to get a big boost when Qualcomm reports on May 1.
The question here becomes the chase. The stock was under $60 two days ago but now we are at $80. That 33% bump in market cap is a bit steep for two days; however, I agree that it is the start to a bigger move. Jim Cramer called it a multi-year move and I agree. I believe we'll see QCOM trade in the $150 range in the next 2 1/2-3 years.
As far as right here, right now goes, I would prefer to see at least a few days of consolidation similar to the action we are seeing in Disney DIS this week. After the big two-day move, traders don't have a clear stop or hedge.
If you believe in the multi-year move, you may not be thinking about selling or stopping out of the position, but even the most bullish of views should have a hedge or contingency plan in mind. Sometimes stocks don't do what we think they will or ought to, but we don't have to sit around and simply watch drawdowns.
I do think this settlement and Intel's withdrawal from 5G smartphones catapults Qualcomm just behind Xilinx (XLNX) as a must-own in the 5G space. Maybe that buy doesn't come today, but it should come soon.