Wells Fargo shared its views on three tech companies ahead of their quarterly earnings. Wells Fargo had an Overweight on Apple Inc (NASDAQ:AAPL) with a price target of $205 (22.5% upside).
The rating reflected 1) Apple's competitive differentiation and overall deepening product/services portfolio creating sustainable brand loyalty, 2) Apple's strong balance sheet and sustainable FCF generation; continually funding a solid capital return strategy, and 3) The continued expansion of Apple's recurring paid subscriber base.
The price target reflected Apple's expanding subscription customer base sustaining a higher multiple.
Wells Fargo had an Equal Weight on Qualcomm Inc (NASDAQ:QCOM) with a price target of $185 (31.2% upside). The rating reflects not being more constructive due to valuation. Additionally, it saw QCOM continue to be a victim of its success.
The need for anti-competitive regulatory compliance and an industry-wide reluctance to rely too heavily on QCOM's MSM processors and related RF front-end (RFFE) solutions could constrain QCOM's ability to take the market share necessary to grow in a stagnant and mature smartphone market.
The price target implying a discount to its peers reflected the presumed eventual loss of the Apple baseband/RF business.
Wells Fargo saw it difficult for QCOM shares to outperform peers based on constrained LT growth prospects specific to the mature mobile handset market, which still drives ~60% of QCT sales.
Wells Fargo had an Equal Weight on MaxLinear Inc (NASDAQ:MXL) with a price target of $66 (41.2% upside). The rating reflected skepticism about solid broadband cable net adds (and upgrades).
Wells Fargo saw its prior thesis (e.g., underappreciation of accretion from Intel HG business) has come to actuality. Investors may not experience the upside to FY21 estimates as needed to allow MXL shares to outperform from this point forward.
The price target at a slight discount to peers reflected potential weakening in broadband cable net sub adds and the general maturity of the broadband market.
