JP Morgan analyst Samik Chatterjee has added Qualcomm stock to his company’s “analyst focus list.”
Sean Gallup/Getty Images
Qualcomm shares receive a boost Monday from JP Morgan analyst Samik Chatterjee, who added the stock to his company’s “analyst focus list” Monday morning, claiming earnings in 2022 should benefit from a combination of easing supply chain pressures. and product diversification.
Chatterjee’s call to Qualcomm (ticker: QCOM) was part of a broad reshuffle of its stance on networking and hardware stocks. In general, the analyst suggests that investors shift their focus towards networking and away from hardware stocks, but there are some exceptions.
“The challenges posed by the pandemic have accelerated demand for technology hardware across the board, whether it be the demand for devices for hybrid work or the demand for network bandwidth or the demand for network upgrades for a more flexible and robust network infrastructure. Chatterjee writes in a research note. “The acceleration of these drivers was evident in the strong sales growth that the sector recorded in 2021. As we enter 2022, the drivers remain the same, with another strong demand for the hardware sector; although we are seeing the commercial demand drivers accelerate as consumer demand declines.”
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He sees four major drivers for the sector: growth in demand for 5G smartphones; acceleration of “hyperscaler” cloud capital spending; a “robust ramp” in telco spending, especially for 5G extensions; and strong corporate spending. He warns that supply could limit growth in the first half of 2022, but that “the floodgates will open” in the second half.
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 upcoming product cycle, especially for iPhone. For Qualcomm, he sees a “reappraisal” of inventory ahead, driven by product diversification into areas such as automotive, Internet of Things, augmented and virtual reality, PCs and fixed wireless devices. The analyst likes to see Arista, a supplier of network equipment, as a game on the growth of the cloud infrastructure. And he’s bullish on Ciena’s bet on increasing cloud and telecom capital budgets.
Chatterjee also shook the ratings of other hardware stocks.
He removed both Cisco Systems (CSCO) and Dell Technologies (DELL) stocks from JP Morgan’s analyst focus list, though he retains the Overweight ratings for both stocks. NetApp (NTAP) shares are upgraded to Overweight from Equal Weight. “We see that the company is well positioned to transition into higher growth opportunities while leveraging its leadership position in the enterprise storage market,” Chatterjhee wrote. The analyst is raising shares of National Instruments (NATI), a testing and measurement company, from underweight to neutral, mainly on a valuation basis, with the stock falling slightly for the year so far. CommScope (COMM) stocks are downgraded from Overweight to Neutral citing “execution risk” with a relatively new management team. Cambium Networks (CMBM) shares are also downgraded from Overweight to Neutral; he prefers other network and hardware stocks.
During Monday trading, Qualcomm shares are up 2% to $187.47. Apple shares have fallen fractionally, Arista shares are up 2% and Ciena shares are down 0.7%.
Write to Eric J. Savitz at [email protected]