As a QUALCOMM, Inc. (NASDAQ:QCOM) and NXP Semiconductor deal hangs in the balance (likely poised for all i’s to be dotted early this year), one confident bull sees an enticing acquisition.
For context, last October, QCOM struck a deal to shell out $110 per share in a cash deal with NXPI. Yet, now shares are trading above $115. The question here: Will QCOM up its ante for a higher-priced M&A agreement? Keep in mind, the regulator body in China MOFCOM still has yet to sign off the deal.
However, top analyst Amit Daryanani at RBC Capital believes should MOFCOM approval be under way, QCOM will be faced with the choice to bump up its bid on NXPI. By Daryanani’s calculations, there are over $500 million in synergies that can be “likely” garnered in 2019 timeframe.
Betting on odds for a higher bid that could scale up to $125, especially considering NXPI’s strength in its latest earnings show, Daryanani wagers it “justifiable” for QCOM to pay more. Moreover, the analyst commends the prospects available with NXPI’s “sizable potential accretion.”
Therefore, the analyst maintains an Outperform rating on QCOM stock with a price target of $80, which implies a just under 22% upside from current levels.
Here’s what you need to know; and why Daryanani wagers the chip giant should grab hold of the automotive computing expert-
“The QCOM/NXPI transaction would be materially accretive (35-40%+) despite an improved bid to $125 (QCOM bid stands at $110, activist investors have publicly asked for $135),” writes the analyst.
Daryanani boils his upbeat stance on the M&A deal, even at a more expensive price, to three key points: “NXPI can provide several unique attributes: 1) An attractive way to play secular content growth in automotive and offer a platform for building assets towards autonomous vehicle-centric solutions. 2) Attractive MCU assets broaden end-market diversity and enhance QCOM’s position in IoT. 3) NFC/Mobile provides a differentiated and attractive offering for mobility customers and potential to further integrate this with core-QCOM assets.”
To put it simply, investors get ready, because this bull is angling for a needle-mover with this chip giant’s opportunity: “we think the stock is positioned to move higher either via formal acceptance of AVGO’s $82 bid and/or QCOM convincing shareholders on their ability to better execute in CY18 and beyond.”
Amit Daryanani has a very good TipRanks score with a 79% success rate and a high ranking of #17 out of 4,728 analysts. Daryanani realizes 26.7% in his annual returns. However, when recommending QCOM, Daryanani forfeits 3.1% in average profits on the stock.
TipRanks points to a largely positive analyst consensus on the Street surveying QCOM stock. Out of 14 analysts polled in the last 3 months, 9 are bullish on Qualcomm stock while 5 remain sidelined. With a healthy return potential of 48%, the stock’s consensus target price stands at $95.00.