The US Federal Trade Commission (FTC) versus Qualcomm (QCOM) case started Friday, January 4, 2019, with a 10-day non-jury trial. The FTC’s complaint alleges Qualcomm engaged in anticompetitive behavior including the supply of basebands by requiring a license to Qualcomm patents, paying incentives to OEMs to induce acceptance of license terms, refusing to license standard-essential patents to chipset competitors, and entering into exclusive arrangements with Apple.
Canaccord analyst Michael Walkley commented, “With the FTC already providing a partial summary judgement requiring Qualcomm to license cellular standard-essential patents to the Alliance for Telecommunications Industry Standards and the Telecommunications Industry Association, this FTC case presents potential risks to Qualcomm’s licensing practices. Further, Judge Koh ruled Qualcomm cannot show Apple’s move to exclusively use Intel chipsets as part of its defense to the complaints. With the FTC focusing on how Qualcomm’s chipset business and licensing practices are inter-related combined with some initial rulings by Judge Koh not seen as favorable to Qualcomm, we believe Apple will at least wait until the final FTC ruling before reaching a settlement with Qualcomm. Given the importance of the FTC case as it relates to Apple’s complaints, we view this as one of the more important rulings before Qualcomm and Apple eventually reach a settlement agreement. However, given Qualcomm’s leverage by asserting its non-essential patents and winning injunctions versus older iPhone models, we believe the two companies will eventually settle.”
Most importantly for investors, Walkley believes that an increasing smartphone market share in the second half of 2019 will position QCOM well. As a result, the analyst maintains a Buy rating with a price target of $75, showing just about 35% potential upside. (To watch Walkley’s track record, click here)
TipRanks indicates Wall Street is evenly split on this chip giant. Out of 17 analysts polled in the last 3 months, 8 are bullish on Qualcomm stock, while 9 remain sidelined. Yet, consider that the 12-month average price target of $68.42 reflects healthy upside potential of nearly 22% from where the stock is currently trading; in other words, optimism circulates among analyst sentiment even amid apprehension. (See QCOM’s price targets and analyst ratings on TipRanks)