Qualcomm (NASDAQ: QCOM) announced a significant increase in their capital return program on March 9. The semiconductor company announced a stock repurchase authorization up to $15 billion, replacing the previous program which has $2.1 billion authorization remaining. Qualcomm plans to repurchase $10 billion of its common stock within one year. Additionally, the company announced a 14% quarterly dividend increase from $0.42 to $0.48 per share.
CEO Steve Mollenkopf commented, “Our business continues to generate substantial operating cash flow, and today’s announcement represents an important step in returning that cash to our owners while still preserving the strategic flexibility needed to drive stockholder value through growth.”
Qualcomm reported year-over-year growth in its most recent quarterly report, but guidance fell below expectations due to competition in China. The American-based chip manufacturer revealed in January that it had lost Samsung, a major customer. Samsung opted to use its own processors for the Galaxy S6 phone instead of Qualcomm’s Snapdragon 810.
Last month, Qualcomm reached a settlement with the Chinese National Development and Reform Commission (NDRC) after a 16 month investigation. Qualcomm was found guilty of violating China’s 2007 Anti-monopoly Law and will pay a $975 million fine; the largest antitrust fine ever imposed by Chinese regulators.
On March 10, analyst Michael Walkley of Canaccord Genuity reiterated a Buy rating on Qualcomm and raised his price target from $84 to $87 to “reflect the impact of the increased capital return program.” Walkley noted that Qualcomm’s increased capital return program was “consistent with our positive thesis [that] the company would increase cash return post the resolution of the NDRC investigation.” The analyst continued, “Given the potential for recovering earnings growth in F2016 with potentially better QCT high end market share and improved QTL licensing collections from Chinese OEMs with the potential for catch-up payments, we believe the shares are undervalued trading at roughly 12.5x or 9.5x ex-cash our updated F2016 pro forma EPS estimate.”
Michael Walkley has a 71% overall success rate recommending stocks with a +25.6% average return per recommendation.
Separately on March 10, analyst Timothy Arcuri of Cowen & Co. maintained an Outperform rating on Qualcomm and slightly raised his price target from $75 to $76. Arcuri noted that the new capital return plan “should help to increase investor confidence that the set-up for ’16 is indeed improving.” He continued, “We continue to see an upward bias to F2016 given the net positive NDRC resolution, the lower likelihood of spill-over to other geos, a higher chance of collecting on China 3-mode LTE and moderating QTL ASP.”
Timothy Arcuri has a 74% overall success rate recommending stocks with a +19.5% average return per recommendation.
On average, the top analyst consensus for Qualcomm on TipRanks is Moderate Buy.
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