Yesterday, chip giant Qualcomm (QCOM) announced that it has entered into accelerated share repurchase (ASR) agreements with several banks to repurchase an aggregated of $16 billion of its common stock, with an initial delivery to Qualcomm of ~178M shares. Apparently, the company attempts to compensate investors for the collapse of its $44 billion acquisition of NXP Semiconductors in July due to Chinese opposition.
In reaction, RBC’s top analyst Amit Daryanani reiterated an Outperform rating on Qualcomm shares, with a $77 price target, which implies a slight upside potential from current levels.
Daryanani commented, “We think this structured program could potentially increase FY19 EPS by ~60-70c. This offer represents the second meaningful step in QCOM’s up to ~$30B buyback program, recall QCOM has previously executed a modified Dutch option resulting in a share reduction of ~76M […] Our Sept-qtr revenue/EPS estimates are at $5.5B/ $0.82 vs. Street at $5.5B/$0.83. Our FY18E and FY19E revenue/EPS estimates currently stand at $22.4B/$3.62 and $22.3B/$4.51, respectively.”
Bottom line: “We are encouraged by QCOM’s announcement, and believe this offer could meaningfully accelerate the share reduction and EPS accretion. On the legal dispute front, we believe QCOM is making progress with payment from the 2nd licensee in dispute and upcoming key legal dates.”
Daryanani is one of the top-rated analysts who cover the stock. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Daryanani has a yearly average return of 24.1% and a 80% success rate. Daryanani has a 22.4% average return when recommending QCOM, and is ranked #35 out of 4875 analysts.
Wall Street’s voice echoes Daryanani’s bullish conviction, as TipRanks analytics indicate QCOM as a Buy. Based on 16 analysts polled in the last 3 months, 11 rate a Buy on Qualcomm stock while 4 maintain a Hold, and one recommends a Sell. However, the 12-month average price target stands at $72.64, which implies a 3.5% downside from current levels. (See QCOM’s price targets and analyst ratings on TipRanks)
As of this writing, Qualcomm shares are trading at $75.06, up $0.45 or 0.60%.