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Behind Qualcomm's Recent Downgrade

Regulatory concerns led us to downgrade the innovative tech firm's moat rating, says Morningstar's Brian Colello.


Brian Colello: We recently downgraded our moat rating for Qualcomm (QCOM) to narrow from wide. The reason why we did this is, as we think about wide-moat stocks, we think about them generating excess returns on capital with near certainty over the next decade.

We encountered a problem with Qualcomm as we think about them facing regulatory battles by various regulators across the world--but most notably in South Korea. The South Korea preliminary report suggests that Qualcomm's royalties, which have been somewhere between 3% to 5% of the price of the phone, could be based on a lower amount.

Brian Colello does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.