Qualcomm (NASDAQ: QCOM) shares fell almost 2% in trading on Wednesday morning following news that Samsung Electronics (SSUN, Financial) will opt out of using the company’s applications processor in its new Galaxy S6 smartphone. Samsung is passing on Qualcomm due to overheating issues of the “Snapdragon 810” part during Samsung tests.
As a result, rumors have been circulating that Samsung will stop using Qualcomm’s parts in its smartphones altogether.
However, Cowen & Co. analyst Timothy Arcuri does not agree with Samsung’s decision stating, “we think this is wrong.” The analyst proceeded to reiterate an Outperform rating on QCOM with a $79 price target.
Arcuri believes the talk surrounding Qualcomm’s overheating issues are “long-rumored” and that the company has already fixed the issue. The analyst thinks in the worst case scenario the end result of the overheating chip is a delay in shipment by two to three months, which Arcuri believes is “still…roughly in line with the company’s guidance of meaningful shipments of commercial devices.”
The analyst makes several points in defense of Qualcomm, stating “1) We believe the vast majority of investors with whom we speak are well aware of the issues and expect at least some of the models to be launched w/ Samsung’s own Exynos processor so the press is hardly uncovering new information; 2) our work has long suggested that QCOM was rushed and didn’t have time to customize the ARM core for 20nm for the 810 and there was an issue w/the ARM design; 3) we believe the design issue was at the base layers – not metal as indicated by some competitors in Asia – and the resulting delay was ~2-3 mos; 4) we believe QCOM already solved the issue and production for 810 is ~2-3 mos behind schedule; 5) this press report speculates that Samsung will use Exynos for ALL models – we consider this UNLIKELY as Samsung would have to use a different modem and RF in addition to the SoC – this is a very big undertaking and our work suggested Samsung was not ready with a complete solution.”
Timothy Arcuri currently has an overall success rate of 71% recommending stocks and a +15.9% average return per recommendation.
The analyst has a history of rating stocks in the technology sector, including Apple (NASDAQ: AAPL) and Broadcom Corp. (NASDAQ: BRCM). Arcuri has rated Apple 21 times since September 2013, earning a 95% success rate recommending the company and a +27.9% average return per recommendation. Likewise, Arcuri has rated Broadcom 7 times since April 2014 with an 86% success rate recommending the stock and a +30.4% average return per recommendation.
On average, the top analyst consensus for Qualcomm on TipRanks is Moderate Buy.
To see more recommendations from Timothy Arcuri, visit TipRanks today!
