J.P. Morgan analyst Samik Chatterjee added Qualcomm stock to his firm’s “analyst focus list.”
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Qualcomm stock is getting a boost Monday from J.P. Morgan analyst Samik Chatterjee, who Monday morning added the stock to his firm’s “analyst focus list,” asserting that earnings in 2022 should benefit from a combination of easing supply-chain pressures and product diversification.
Chatterjee’s call on Qualcomm (ticker: QCOM) was part of a broad shuffling of his stance on networking and hardware stocks. Overall, the analyst suggests investors shift their focus to networking and away from hardware stocks, but there are some exceptions.
“The challenges brought about by the pandemic have accelerated the demand drivers for technology hardware across the board, be it in the form of demand for devices for hybrid work or demand for network bandwidth or demand for network upgrades for more agile and robust network infrastructure,” Chatterjee writes in a research note. “The acceleration of these drivers was evident in the strong revenue growth recorded by the sector in 2021. As we head into 2022, the drivers remain the same, with a strong demand backdrop again for the hardware sector; although we see commercial demand drivers accelerating as demand wanes from the consumer.”
He sees four big drivers for the sector: Growth in 5G smartphone demand; acceleration in “hyperscaler” cloud capital spending; a “robust ramp” in telco spending, in particular on 5G buildouts; and strong enterprise spending. He cautions that supply could limit growth in the 2022 first half, but that in the second half, “the flood gates open.”
Chatterjee writes that his top four picks for 2022 are Qualcomm, Apple (AAPL), Arista Networks (ANET), and Ciena (CIEN). He likes Apple for a strong coming product cycle, in particular for iPhone. For Qualcomm, he sees a “re-rating” of the stock ahead, driven by product diversification into areas like automotive, the Internet of Things, augmented and virtual reality, PCs and fixed wireless. The analyst likes networking-equipment vendor Arista as a play on cloud-infrastructure growth. And he’s bullish on Ciena as a bet on increasing cloud and telco capital spending budgets.
Chatterjee also shuffled ratings on other hardware stocks.
- He removed both Cisco Systems (CSCO) and Dell Technologies (DELL) stock from the J.P. Morgan analyst focus list, though he keeps Overweight ratings on both stocks.
- NetApp (NTAP) stock gets an upgrade to Overweight from Equal Weight. “We see the company well positioned for a transition toward higher growth opportunities while leveraging its leading position in the Enterprise storage market,” Chatterjhee writes.
- The analyst upgrades shares of National Instruments (NATI), a test and measurement company, to Neutral from Underweight, mostly on valuation, with the stock down slightly for the year to date.
- CommScope (COMM) stock gets a downgrade to Neutral from Overweight, citing “execution risk” with a relatively new management team.
- Cambium Networks (CMBM) stock is cut to Neutral from Overweight as well; he prefers other networking and hardware stocks.
In Monday trading, Qualcomm shares have rallied 2%, to $187.47. Apple stock is off fractionally, Arista stock is 2% higher and Ciena stock is down 0.7%.
Write to Eric J. Savitz at [email protected]
