Raymond James reiterates Qualcomm stock rating amid memory pricing concerns

Raymond James reiterated Market Perform on Qualcomm but lowered estimates due to sustained memory price increases that could pressure smartphone unit volumes and offset incremental content gains; Qualcomm’s modem share with Apple is also uncertain despite a modem agreement through calendar 2026. Apple-related items include a market cap of $3.62 trillion and P/E of 31.24, a 9.2% YTD stock decline, a £390,000 UK fine tied to £635,618.75 in payments to sanctioned service Okko, rare hardware-designer bonuses (several hundred thousand each), hiring of Lilian Rincon for AI product marketing, and plans to open Siri to third-party AI in iOS 27. Overall, near-term headwinds for Qualcomm and supply-chain cost pressure are the key risks, partially offset by Apple’s strategic AI investments and talent retention moves.

Analysis

Memory-price driven cost inflation introduces a concentrated near-term shock to volume-sensitive Android tiers that disproportionately feed Qualcomm’s unit growth. If OEMs pass through ~5–10% of memory-driven ASP pressure to consumers or trim sub-$200 SKU shipments, industry handset volumes in the bottom third of the market could compress by a comparable amount over the next 2–4 quarters, translating into a material single-digit percentage hit to Qualcomm’s handset-connected revenues even as premium content per device creeps higher.

Over a 12–36 month horizon two structural forces collide: Apple’s planned modem insourcing (timelines still negotiable) will progressively shave modem revenue share from Qualcomm, while premiumization and AI-driven content gains on higher-ASP Android phones can raise Qualcomm’s content-per-phone by perhaps low double-digits on upgraded SKUs. That creates a convex outcome — a near-term unit shock with partial offsetting per-device upside — so the P&L sensitivity shifts from purely volume to a volume x mix dynamic that severity-weights by geography (emerging markets first).

Second-order winners include cloud/AI service providers and premium silicon suppliers: Apple’s push to open Siri to third-party AI and its AI hires accelerate services monetization and platform lock-in over 12–24 months (supporting AAPL multiple expansion if execution holds), while Google/third-party assistants become potential beneficiaries of Apple’s loosening ecosystem rules. Catalysts to watch that would reverse the current weakness are memory-price normalization within 2-3 quarters, significant delays to Apple’s in-house modem beyond 2026, or Qualcomm offsetting handset losses with accelerated RF/automotive wins — each would materially alter the haircut priced into QCOM over the next 6–18 months.

Key Decisions for Investors

• Pair trade (6–18 months): Go long AAPL and short QCOM on a dollar-neutral basis. Rationale: capture asymmetric upside from Apple’s AI/services optionality and limited regulatory/monetary risk versus near-term Qualcomm unit compression and mid‑term modem share erosion. Size: small initial allocation (2–3% net exposure) and rebalance monthly against realized handset shipment data; stop-loss if pair moves 10% adverse relative to entry.
• Long-term leveraged but limited-risk bullish on AAPL (12–36 months): Buy Jan‑2027 LEAP call spread on AAPL to express AI/services upside with defined downside (buy calls and sell higher strike calls). Rationale: optionality to multi-year services and AI monetization accelerating with Siri openness; payoff if Apple sustains >15–25% share price appreciation. Max loss = premium paid; target 2–4x upside if execution and multiple expansion align.
• Directional short / option hedge on QCOM (6–12 months): Buy QCOM puts or a bear put spread expiring mid‑2025 to express near-term unit pressure from memory inflation and the impending Apple modem decline. Rationale: compressing lower-tier shipments and uncertain modem roadmap create a clear catalyst window; trim exposure if company reports better-than-expected content gains or if memory prices normalize. Position size: conservative (1–2% portfolio) given volatility; risk = premium paid for puts.
• Tactical long on GOOGL (6–12 months): Buy 6–12 month GOOGL calls or take a long equity stake as a hedge/beneficiary of Siri opening to third‑party assistants. Rationale: Google stands to regain flow from Apple’s assistant loosening and capture additional query/ads/AI data; small position to capture asymmetric upside if integrations are prioritized. Risk: execution and regulatory friction; keep as <1.5% portfolio weight.