Qualcomm (QCOM) Faces Tablet Bubble Risk Says Macquarie

Starting off coverage of Qualcomm (NASDAQ:QCOM) with a "Neutral" rating, Macquarie Equities Research analyst Shawn Webster said he believes the stock is discounting the majority of the enthusiasm over smartphones and tablets.

Webster said, "Due to the many designs in progress in the smart phone arena, we are concerned “noise” in the supply chain could emerge as not every handset or tablet company building systems will gain share. This adds risk, in our opinion, of a slowdown in chip orders for handsets/tablets in 2H CY11 and increases risk of pricing pressure of the handset devices themselves (to which QCOM is sensitive). Our global handset team also estimates average handset selling prices should significantly decelerate after peaking in 4Q CY10. We note QCOM stock has a long history of becoming 'tired' around these handset price peaks."

Assuming there is no bubble, Webster sees the tablet and smartphone market generating close to $25 billion in revenue for Qualcomm this year, and is growing faster than the overall semiconductor industry, which could reach about 12 percent a year by 2015, against about 4 percent annually for the sector.

Add to that other products Qualcomm has exposure to, such as e-readers, the company could grow at an annual rate of 17 percent a year.

Qualcomm closed Monday at $53.48, down $0.13, or 0.24 percent.