Wolfe Research downgrades Qualcomm over Apple's chip plans

Qualcomm's (QCOM) stock is facing downward pressure following a downgrade from Wolfe Research on Monday. The firm has lowered its rating on the semiconductor company to Peer Perform from Outperform, highlighting Apple's (AAPL) internal modem chip production for the latest iPhone and the negative impact it will have on Qualcomm's revenue.

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This post was written by Angel Smith

Video transcript

Let's get to our call of the day.

Wolf Research downgrading Qualcomm from outperform to peer perform The note citing Apple's internal modem production as a key headwind for Qualcomm.

Wolf estimates that Apple will supply its own modems for all phones outside the US by the time the tech giant launches the iPhone.

18.

So to note, Julie, that's the iPhone 18.

We don't even know when that's coming out yet when the 16 is about to come out, so right.

And so they said it's not a next spring problem might not be a next fall problem, but it's eventually going to be a real problem.

And this has been something that has been discussed for a couple of years now regarding Qualcomm.

And it was when is Apple going to get to the point where they're able to make their own modems and Wolf saying, We think we're finally there?

And they think essentially, it was an interesting call because it's not saying too much negative about Qualcomm.

It's more so just saying eventually this is gonna be something that weighs on the overall growth of the company, and that's probably already priced into the growth is already probably priced into the stock.

So they move it from a buy, essentially a buy to a to a hold or a neutral.

And let's see how it plays out was my take away from the so similar to NVIDIA, which we talked about earlier.

Qualcomm peaked on June 18th.

Since then, it's down more, about 29% or so as it's sold off with the rest of the group, and I was just looking at some of the numbers here.

According to Bloomberg, Apple accounts for 27% of Qualcomm's annual revenue, so around a quarter or more of its revenue.

So this doesn't say that all of that would go away, but it's a decent chunk to potentially be at risk.

And then he also talks about the appeal of some of the other businesses whose Qualcomm has been working pretty aggressively to diversify its revenue streams away not just from Apple but away from smartphones and expanding into other things.

So it's auto business is growing quickly.

It also has an Internet of things business, and he thinks that that's going to be a focus for their next investor day.

Both of those, though even though they're growing quickly are pretty small parts of the business.

Still, so they still have a little ways to go.

And the question is, do you wanna be in the name as they make that transition or wait until you learn more right?

And it seems like for now, Wolf says, they wanna learn a little bit more about how those other parts of the business are gonna pick up before they necessarily are getting back in as a buyer.

Yeah, I will say they're in the minority.

There are more buy.

They're about 63%.

64% of analysts who rate the stock have buys on the stock, so it's still fairly everyone's gotta buy jewellery.

You're right, you're right.