.August 12, 2024 6:59:00 PM

Wolfe Research downgraded Qualcomm to Peer Perform from Outperform due to concerns about Apple’s internal modem development impacting Qualcomm’s revenue streams. The firm removed Qualcomm’s price target, citing increased uncertainty about the company’s future outlook.

Apple’s progress in creating its own modem has been underestimated, posing a significant threat to Qualcomm’s core business. Qualcomm’s forecast of supplying modems for only 20% of iPhone 18 models now seems overly optimistic, with Apple’s modem expected to be in most phones outside the U.S. by the iPhone 18 launch.

Wolfe Research projects a $4 billion revenue decline and a $1.50 drop in earnings per share for Qualcomm between 2024 and 2026 due to losing Apple’s business. Despite Qualcomm’s efforts to diversify into AI handsets and IoT, analysts doubt these segments can offset the anticipated loss.

With Qualcomm’s attractive valuation at 15 times 2026 EPS, Wolfe Research remains cautious about the stock due to revenue loss from Apple and uncertain growth prospects. The firm finds it challenging to maintain a positive outlook on Qualcomm given the looming challenges.