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QUALCOMM, Inc. (QCOM): Top Analyst Is ‘Sticking’ with the Bulls for ‘Attractive’ Risk/Reward Scenario

Amit Daryanani weighs in on regulatory approval front thoughts in terms of the potential QCOM/NXPI deal.


QUALCOMM, Inc. (NASDAQ:QCOM) has one bull standing by the chip giant, who bets on compelling risk/reward scenario even amid a question mark hanging over the NXPI acquisition.

Top analyst Amit Daryanani at RBC Capital sheds light on regulatory approval following HSR clearance now anticipated to be garnered from the Federal Trade Commission (FTC) for the merger; in the past, this clearance had a deadline expiration running out yesterday.

Now, both QCOM along with NXPI have filed once again with the FTC for a brand new clearance- once that should be within reach soon enough.

There is a bigger regulatory obstacle at play, however, that continues to loom large- the Ministry of Commerce of the People’s Republic of China (MOFCOM)- and Daryanani sizes up the Chinese regulatory body to be in the thick of its anti-trust review.

The analyst pinpoints an escalating challenge here: What if QCOM must put forth more concessions than with the European Commission to win MOFCOM’s green light? In that case, watch out for dilution ahead of the roughly $1.50 EPS accretion, says Daryanani. Once April 25th hits, the second automatic extension of the initial NXP purchase deal, presently, the analyst sees no further automatic extension ahead.

“We continue to believe closing NXP remains as QCOM’s preference, however, should the deal fall through, QCOM will likely repatriate the cash and execute stock buybacks (size of ~$20-25B we estimate) to provide similar level of EPS accretion for shareholders. In a recent filing, QCOM disclosed its FY19 annual cash incentive plan, linking the funding rate with QCOM’s previously laid out FY19 EPS target of $6.75-7.50, which we think demonstrate QCOM’ confidence in achieving its FY19 EPS target,” underscores the analyst.

In a nutshell, “We are sticking with our OP rating driven by our belief that 2-3 catalysts are in the horizon – AAPL settlement, NXPI close or material buyback and Huawei resolution. With the stock at under 10x FY19E EPS of $6.75-7.50 (management target) and >3% yield we think the risk reward is attractive though NXPI uncertainty may keep the price tempered till we get resolution,” Daryanani concludes, continuing to back the tech player.

Therefore, the analyst reiterates an Outperform rating on QCOM stock with an $80 price target, which implies a just under 49% upside from current levels.

Amit Daryanani has a very good TipRanks score with an 82% success rate and a high ranking of #13 out of 4,758 analysts. Daryanani realizes 27.6% in his yearly returns. However, when recommending QCOM stock, Daryanani forfeits 14.5% in average profits on the stock.

TipRanks highlights optimistic sentiment hovering above the chip giant’s shares. Out of 14 analysts polled in the last 3 months, 8 are bullish on QCOM stock, 5 remain sidelined, while 1 is bearish on the stock. With a return potential of 30%, the stock’s consensus target price stands at $70.08.