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Qualcomm announced a new $10 billion share buyback late Tuesday.

Krisztian Bocsi/Bloomberg


Qualcomm

shares were rising in extended trading Tuesday after the mobile chip maker announced plans for a $10 billion stock buyback.

The company (ticker: QCOM) said its board approved the stock repurchase authorization, which is effective immediately and has no expiration date. It noted the total is in addition to $900 million in repurchase authority from a July 2018 program.

Qualcomm stock was up 1.4% to $124.68 in after-hours trading, nearly bouncing back from a 1.6% drop in Tuesday trading. That drop followed a note from Wells Fargo analyst Gary Mobley, who opted to cut his expectations for shares rather than upgrade the stock amid its latest slide.

Qualcomm shares are down 17% this year.

Mobley lowered his price target on the stock to $138 from $155 in a note on Tuesday. The analyst, who still has an Equal Weight rating, believes Qualcomm is executing well in the current environment; he just thinks that’s all largely priced in and doesn’t see a reason to upgrade the stock.

He wrote, “we are reluctant to chase the stock with a rating upgrade because QCOM may be seeing the most optimal of conditions.”

Mobley points to the newness of the 5G product cycle and Qualcomm achieving peak market share at


Apple

over the next few years as examples of how the firm may be seeing the most optimal conditions—something that may not last. That could explain the discount it trades at to peers, according to Mobley.

Still, with chip demand exceeding supply, Mobley says the company continues to optimize its mix and margins, which could yield better than expected profitability in its chips segment. He also note’s Qualcomm’s buying scale has allowed it to fill customer demands even in a supply-constraint environment.

More broadly, Mobley writes that semiconductor stocks may begin to underperform once the gap between demand and supply for chips narrows, when chip order lead times shrink, and when chip inventory in the channel begins to increase.

“We continue to favor stock picks with idiosyncratic or secular growth catalysts independent of the semiconductor cycle,” he added, pointing to firms like


Skyworks Solutions

 (SWKS) and


Qorvo

(QRVO).

Mobley is a bit of a contrarian on Qualcomm stock. Of the 29 analysts listed by FactSet, 18 have Buy or equivalent ratings while the other 11 have Hold or equivalent ratings. The mean price target of $180.99 would imply 47% upside. The company is set to report fiscal fourth-quarter earnings results on Nov. 3.

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