Morgan Stanley analysts, led by Joseph Moore, see Qualcomm benefiting from smartphone demand and Lam benefiting from a bright long-term outlook.
The analysts raised the rating for both companies to overweight from equal weight. They lifted their share-price target for Qualcomm to $102 from $83 and for Lam to $334 from $253.
As for Qualcomm, “we see smartphone demand improving through the year, with rising average selling price as we transition to 5G,” the analysts wrote in a report.
“Volumes down 30% year on year in the second quarter should be a good entry point as we see consumption rebounding quickly.”
Further, “while we expect relatively limited operating leverage near-term in line with company guidance,” there’s “potential for longer term [Qualcomm CDMA Technologies] margin improvement from levels that are well below every other company in our coverage,” the analysts said.
When it comes to Lam, “multiple concerns have left us on the sidelines for a large move, and there are still a myriad of challenges as we move through this year,’ the analysts said.
But looking forward, “we favor Lam over peers given the higher exposure to memory …, where we see trailing spending … improving from here,” the analysts said.
Qualcomm shares recently traded at $89.30, up 3.4%. The stock has climbed 18% over the past three months.
Lam at last check traded at $303.71, up 4.7%, and has gained 17% over the past three months.