Investors are too optimistic over what an end to the U.S.-China trade war and the rollout of 5G will mean for Qualcomm , Morgan Stanley said Monday. Qualcomm was 2% in Monday's premarket trading. The firm downgraded the stock to an equal-weight rating, saying the semiconductor company no longer trades at a discount to peers and that investors are pricing in positive outcomes from an end to the ongoing U.S.-China trade war. The stock has gained 65% this year, compared with the S & P's 23% rise. "We downgrade QCOM [to equal-weight from overweight] as valuation gap to semiconductor peers has closed, and market appears to: 1) assign a high probability of a China/US trade agreement, 2) downplay the [Federal Trade Commission] case, and 3) expect 5G acceleration," Morgan Stanley analyst James Faucette said. "QCOM's multiple has expanded to better match those of other semiconductor companies as investors have gained confidence in the company's ability to sustain its business practices and dominant market position in cellular network connectivity," he added. Faucette did, however, raise his price target to $90 from $89. He also raised his Q1 EPS estimate to 83 cents from 79 cents. The stock lost more than 2% during Monday's session. - CNBC's Michael Bloom contributed reporting.
Investors are too optimistic over what an end to the U.S.-China trade war and the rollout of 5G will mean for Qualcomm, Morgan Stanley said Monday.