All Eyes on Qualcomm (QCOM)-NXP Semiconductors (NXPI) Deal; Top Analyst Shares Two Cents
Qualcomm (NASDAQ:QCOM) has been trying to wrap up its $43 billion acquisition of automotive chip firm NXP Semiconductors (NASDAQ:NXPI) for over 18 months. The merger has received regulatory approval from 8 counties. However, China’s Ministry of Commerce has yet to approve the deal amid rising trade tensions with the US. Qualcomm and NXP have set July 25 as the deadline to complete the transaction. If Chinese regulators don’t approve it by then, Qualcomm has pledged to use freed up cash to buy back additional shares, possibly has much as $30 billion.
Mizuho’s top analyst Vijay Rakesh commented, “We believe the QCOM-NXPI deal is entering the final stretch. While the July 25 deadline is a QCOM self-imposed deadline, given the ongoing tariff tensions with China, deal approval could go either way. This could cause some volatility, with significant moves on QCOM and NXPI as sentiment swings. While QCOM could push out the deadline, we believe NXPI is in limbo and potentially wants closure to boost employee morale. QCOM is also entering key litigation as 1) as Europe will kick off in the next weeks with a number of non-FRAND patent litigation hearings; and 2) patent cases in China and the US begin.”
“Given it is almost 2 years after the deal was announced in Oct-2016, we believe there could be some fatigue. While QCOM could push the deadline out, there is potential for NXPI could push for closure and a $2B breakup fee as it impacts morale,” the analyst added.
Net net, Rakesh reiterates a Buy rating on Qualcomm with a price target of $64, which implies an upside of 10% from current levels.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, Rakesh has a yearly average return of 28% and a 68% success rate. Rakesh has a 2.8% average return when recommending QCOM, and is ranked #42 out of 4843 analysts.
This chip giant certainly has the Street divided. Based on 13 analysts polled by TipRanks in the last 3 months, 6 rate a Buy on Qualcomm stock, 6 maintain a Hold, while 1 recommends a Sell on the stock. The 12-month average price target stands at $64.70, marking a nearly 11% upside from where the stock is currently trading.