Whether or not QUALCOMM, Inc. (NASDAQ:QCOM) takes over NXPI, top analyst Amit Daryanani at RBC Capital sees “an attractive large cap value name” in this chip giant all the same. That said, the deal would certainly mark a big near-term tailwind for the company, and Daryanani can’t help musing if odds have become more favorable thanks to one tweet from President Trump.
As such, the analyst reiterates an Outperform rating on QCOM with a $70 price target, which implies a close to 24% upside from current levels.
The weekend saw President Trump announce his and China’s President Xi’s intentions to “give massive Chinese phone company, ZTE, a way to get back into business, fast” on Twitter. Daryanani sheds some bullish light: “If this stance holds up, it would suggest a de-escalation of trade war concerns that have impacted tech companies and specifically resulted in several semiconductor deals stuck in the approval process, notably QCOM/NXPI transaction that has been held up by MOFCOM for 15+ months. Should the tensions between U.S. and China ease up, one of the positives could be the QCOM/NXPI deal getting approved that would unlock sizable $1.50+ synergies for QCOM.”
Though the situation with MOFCOM looks murky right now, Qualcomm is diligently working together with China’s regulatory authority. Keep in mind, highlights the analyst, MOFCOM just gave a nod to Qualcomm’s joint venture with China’s state-owned Datang Telecom for designing smartphone chipsets. Accretion from the NXPI deal could bring in roughly $1.30 to $1.50 in EPS power for the chip giant, predicts the analyst. Yet, should MOFCOM approvals not clear by July 25th, the analyst notes QCOM can always opt for its Plan B: $25 to $30 billion in buybacks that would yield a similar ($1.50) accretion.
In a nutshell, “We think QCOM is an interesting name for value investors as a) either NXPI deal gets done or QCOM does a sizable buyback and b) we see higher probability that OEMs under dispute could settle sooner now that it’s clear QCOM isn’t going anywhere. Finally, should we get more discipline and consistent execution, the stock should see a sustained multiple expansion,” Daryanani concludes.
Amit Daryanani has a very good TipRanks score with an 84% success rate with a high ranking of #15 out of 4,801 analysts. Daryanani realizes 27.6% in his annual returns. However, when recommending QCOM, Daryanani forfeits 9.1% in average profits on the stock.
TipRanks indicates positive sentiment circulates the Street on Qualcomm’s opportunity at play. Out of 13 analysts polled in the last 3 months, 6 are bullish on QCOM stock, 6 remain sidelined, while just 1 is bearish on the stock. With a loss potential of nearly 13%, the stock’s consensus target price stands at $62.40.