Qualcomm (QCOM) shares rose nearly 4% in Thursday’s trading session, after the chip giant approved a $16 billion accelerated stock repurchase agreement as part of a $30 billion stock repurchase program announced in July. Apparently, the company attempts to compensate investors for the collapse of its $44 billion acquisition of NXP Semiconductors in July due to Chinese opposition.
Nomura analyst Romit Shah commented, “This buyback is incremental to the $5bn executed in the recent Dutch tender offer (ended August 27). Inclusive of the two buybacks, and assuming QCOM executes the remainder of its $30bn repurchase program over FY19, we estimate EPS will increase to $1.10 (consensus $0.96) in December, $4.59 in FY19, and $5.23 in FY20.”
“The buybacks are nicely accretive, but even more interesting is the timing. It comes on the heels of a new iPhone launch and in front of several rulings in the U.S., Germany, and China, suggesting that Qualcomm perceives to have a strong hand against Apple. What Apple stands to gain ($10-15) versus lose ($800-1200) per iPhone seems very unfavorable. An initial determination by the ITC is due on September 28, and indications from ITC staff attorneys are that Apple violated at least one patent […] 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 continued.
As such, Shah reiterates a Buy rating on Qualcomm shares, with a price target of $80, which represents a potential upside of 7% from where the stock is currently trading. (To watch Shah’s track record, click here)
A lot on the Street are clamoring behind this chip titan, as TipRanks analytics exhibit QCOM as a Buy. Out of 16 analysts polled in the last 3 months, 11 are bullish on Qualcomm stock while 4 remain sidelined and one is bearish. However, with a potential downside of nearly 3%, the stock’s consensus target price stands at $72.64. (See QCOM’s price targets and analyst ratings on TipRanks)