Qualcomm (QCOM) and Apple (AAPL) have been fighting over patents since early 2017, when Apple filed suit against Qualcomm for roughly $1 billion, saying the wireless chip maker didn’t give fair licensing terms for its technology. Apple wants to pay a lower amount for using Qualcomm technology in its devices. Qualcomm responded by suing Apple for patent infringement and seeking a ban on iPhone sales. The company maintains that no modern handset, including the iPhone, would’ve been possible without its cellular technologies.
Last Friday, an administrative law judge ruled that Apple infringed upon one of the three Qualcomm patents listed in the case. However, the judge found it is not in the public interest to ban the sale of certain iPhone 7 models in the U.S. as Qualcomm sought. This decision is still subject to the final ITC commission ruling, in which the commission can rule differently than that of the administrative law judge.
Nomura analyst Romit Shah commented, “We believe Friday’s ITC ruling reinforces Qualcomm’s momentum in the Apple litigation and increases the likelihood the dispute will be settled before the end of the year. We’ve been recommending Qualcomm shares on the premise that we believe the Apple dispute would be resolved by the end of the year and Qualcomm stands to benefit greatly from a resolution. Friday’s ITC ruling, in our opinion, strengthened this view.”
“We estimate a settlement with Apple is the biggest catalyst, adding about $25 per share in value to Qualcomm. This is not fully reflected in the stock, in our opinion,” the analyst concluded.
As such, Shah reiterates a Buy rating on Qualcomm shares, with a price target of $80, which implies an upside of 8% from current levels. (To watch Shah’s track record, click here)
Net net, a lot on the Street are clamoring behind this chip titan, as TipRanks analytics exhibit QCOM as a Buy. Out of 17 analysts polled in the last 3 months, 11 are bullish on Qualcomm stock, while 5 remain sidelined and one is bearish. However, with a slight downside potential, the stock’s consensus target price stands at $73.62. (See QCOM’s price targets and analyst ratings on TipRanks)