Top Analyst Lifts Price Target for Qualcomm (QCOM) Stock Ahead of Upcoming Key Legal Dates

Qualcomm (QCOM) case against Apple (AAPL) in which it filed complaints for patent infringement and added a cease and desist order to iPhones without QCOM processors is with the U.S. District Court, with initial determination by Sept. 28 and final determination by Jan. 14, 2019 in conjunction with the ITC case.

As the date of the initial determination approaches, RBC’s top analyst Amit Daryanani provides scenario analysis of potential outcomes and EPS impact on QCOM:

  • Scenario 1: Initial determination in QCOM’s favor; QCOM and AAPL settle. Given the determination is in QCOM’s favor, QCOM could potentially be able to settle with AAPL without rendering AAPL a significant concession. In this scenario, we see the settlement between QCOM and AAPL adding ~$1.00–1.25 to FY19 EPS.
  • Scenario 2: Initial determination in AAPL’s favor; QCOM and AAPL settle. Given the determination is in AAPL’s favor, we think QCOM would need to render a meaningful discount, and in our opinion, this could be as high as a 60% price cut. In this scenario, we see the s
  • Scenario “why don’t you meet me in the middle?”: Given that the essence of this dispute is disagreement on pricing, under this scenario, we see QCOM and AAPL agreeing to a new royalty rate/rebates that would satisfy both parties’ demands. We assume ~40% royalty rate discount, which would imply EPS accretion of ~$0.75–0.95.

Net net, Daryanani reiterates an Outperform rating on QCOM, with a price target of $77, which represents a potential upside of 10% from where the stock is currently trading.

“Our base-case scenario of $77 reflects the potential for QCOM to implement a material buyback program and obtain some degree of benefit from licensing resolutions,” the analyst said.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Amit Daryanani has a yearly average return of 24.4% and a 81% success rate. Daryanani has a 17.1% average return when recommending QCOM, and is ranked #28 out of 4875 analysts.

The Street largely seems to echo Daryanani’s positive sentiment on the chip giant, considering TipRanks analytics showcase QCOM as a Buy. Out of 15 analysts polled in the last 3 months, 10 are bullish on Qualcomm stock, 4 remain sidelined, and 1 is bearish. With a slight upside potential, the stock’s consensus target price stands at $70.62. (See QCOM price targets and analyst ratings on TipRanks)

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