This chipmaker looks like a 'buy': Analyst

Is it time for Qualcomm to break up?

Qualcomm's chipmaking and patent licensing units look better together than as separate companies, Morningstar senior analyst Brian Colello said Wednesday, despite a call by an activist hedge fund that Qualcomm should consider shaking things up.

"We think there is more chip growth to be had even with recent market share losses and concerns," Colello told CNBC.

With Qualcomm share prices down 6 percent this year, Jana Partners' founder told CNBC on Monday that the tech company needs to review the units to decide whether they should be spun off.

"What we think they ought to do is just a transparent review of the client businesses, and determine whether or not it makes sense to do either a partial or full split. So we are not definitely saying that they should split it up," hedge fund Barry Rosenstein said.

Read MoreQualcomm should consider breakup: Jana Partners founder

The Qualcomm booth at the 2014 International CES.
Source: Qualcomm | Facebook

Colello said even if Qualcomm stays together and doesn't spin off the chip business, it needs to do something to unlock value for shareholders.

"The competition has caught up," he said. "Intel has a very high quality base-band chip. Samsung is going with its own processors in its new phones. So this stock tends to trade based on chip market share. … Because Qualcomm has the R&D scale to invest in the best products, we think there's a chance they could capture some of that [market share] back, and that will turn the tide."

Even with the depressed shares, Colello remains optimistic on the stock.

"From a valuation perspective, we understand why it's been beaten up because of chips, but because that licensing business is so solid, that's why we like it," he said. "We see the opportunity. It's a buy here."

Disclosure: Colello does not own shares of Qualcomm.