At midnight ET on July 25, semiconductor giant Qualcomm (NASDAQ:QCOM) terminated its deal to purchase NXP Semiconductors (NASDAQ:NXPI) and intends to pay the $2B fee to NXP and increase its share repurchase program to $30B with a target to complete the vast majority by the end of F2019.
Which reaction to Qualcomm’s news was the right one: Selling it or buying it? Well, according to Charter Equity Research analyst Edward Snyder, it’s the latter. This morning, Snyder upgraded QCOM shares from Market Perform to Buy. (To watch Snyder’s track record, click here)
Snyder commented, “We believe Qualcomm will have a difficult time delivering on the revenue growth targets it provided during the Broadcom fight, especially in RF. Nevertheless, the death of the NXP deal (barring an 11th hour reprieve) combined with a tripling of the stock repurchase authorization ($10B to $30B) and management’s commitment to executing a majority of that repurchase in FY19 have greatly improved the outlook for QCOM near-term. If the company also settles one or more of the licensee disputes in the next twelve months, the stock could push to the upper end of the bull case range we detailed in our March 5th note. This would be about a 25% premium to today’s closing price. And while it may have trouble sustaining those levels once the upside catalysts are in the stock, we see few impediments to it getting there in the next four quarters.”
“So, while we remain bearish on the long-term prospects for the core business, we are increasing estimates and upgrading our rating to BUY,” the analyst concluded.
As of this writing, Qualcomm shares are rising nearly 4% to $61.85.
Most of the Street backs Snyder’s torn sentiment between supporting the mobile chip titan, but remaining unconvinced of a full turnaround quite yet. Out of 13 analysts polled by TipRanks in the last 3 months, 7 are bullish on Qualcomm stock, 5 remain sidelined, and 1 is bearish on the stock. With a return potential of 7%, the stock’s consensus target price stands at $66.00.