Qualcomm (QCOM) and Apple (AAPL) have been involved in a lengthy legal battle. While Apple initiated the fight, Qualcomm quickly went on the offensive and turned up the heat in a big way. The chip giant is now directly accusing Apple of stealing trade secrets, then passing them to Intel. Meanwhile, Qualcomm also remains in a patent-licensing dispute with China’s Huawei.
RBC Capital top analyst Amit Daryanani noted, “We think QCOM should continue to work higher as we get incremental clarity on its resolution with AAPL & Huawei. While we realize the next 12 months will be “noisy” given 6+ different court cases that are ongoing between AAPL & QCOM (not including the FTC case against QCOM) – the baseline assumption for us remains that the two parties will reach a settlement over the next ~nine months as there is high probability that AAPL would need QCOM as it transitions to 5G devices in FY20. Key points – 1) Munich court today ruled in favor of AAPL and found no patent infringement done, 2) We are adjusting our models to reflect shift in $100M Huawei payment recognition, and 3) we provide an outline on other ongoing litigation between AAPL & QCOM.”
Furthermore, Qualcomm gears up to deliver its quarterly earnings on November 7, and Daryanani believes revenues should be in line with consensus with some upside on EPS driven by cost reduction initiatives and buybacks. For Dec-quarter, Daryanani is adjusting his QTL revenues by ~$100M (lower) to reflect the new accounting standards that would push the Huawei payment on the balance sheet in Dec-qtr (vs. revenues).
Daryanani reiterates an Outperform rating on Qualcomm shares, with a price target of $77, which implies a potential upside of 20% from where the stock is currently trading.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Amit Daryanani has a yearly average return of 19.5% and a 69% success rate. Daryanani has a 5.5% average return when recommending QCOM, and is ranked #77 out of 4877 analysts.
Net net, the word on the Street rings largely bullish on this chip giant, backing Daryanani’s confident stance, with TipRanks analytics demonstrating QCOM as a Buy. Out of 17 analysts polled in the last 3 months, 11 are bullish on Qualcomm stock, 5 remain sidelined, and only 1 is bearish on the stock. With a return potential of nearly 16%, the stock’s consensus target price stands at $73.62. (See QCOM price targets and analyst ratings on TipRanks)