Citi Research analyst Christopher Danely downgraded shares of Qualcomm Inc. QCOM, -9.73% to neutral from buy Thursday, following what he called a “mixed” earnings report. While Qualcomm exceeded Danely’s expectations with its fiscal first-quarter revenue and earnings per share, gross margins decelerated and came in below his estimates. ” We upgraded QCOM last year based on upside driven by share gains and the 5G upgrade cycle,” Danely wrote. “We believe the upside is over and expect more instances of downside such as the lower margins.” He argued that Qualcomm’s margins came under pressure during the 4G wave as the upgrade cycle “matured,” a trend he expects to repeat with the 5G upgrade cycle. Danely lowered his price target on Qualcomm’s stock to $165 from $194. The shares are off 8% in morning trading Thursday. They’ve risen 17% over the past three months as the S&P 500 SPX, +0.60% has risen 12%.
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