Last week, Qualcomm (QCOM) and LG Electronics came to a licensing agreement which saw the former licensing its 5G technology to the electronics maker. The deal provides even more evidence that the tech world trusts Qualcomm on 5G more than any of its competitors. Though still not mainstream yet, the new cellular technology network is rising quickly in the world, with phones and infrastructure being developed to fit the needs of 5G.
While Deutsche Bank’s Ross Seymore sees this as a “positive,” he remains sidelined on QCOM stock. The analyst reiterated a Hold rating and $75 price target, which reflect ongoing challenges in the broader smartphone market and uncertainty around the legal situation (FTC, EU fine appeal, etc.).
Investors who listened to Seymore over the past year have made 25.3% on their Seymore bets, according to TipRanks.
For Seymore, and much of Wall Street, 5G is the star at Qualcomm. The analyst says the new tech is “likely to be an inflection point for [the company’s radio frequency] business,” with Qualcomm believing it is as much as 1.5 years ahead of the competition. Following discussions with the company, Seymore says Qualcomm believes the “dollar content opportunity per device in 5G is up to 1.5x greater than a comparable 4G device.”
The recent deal with LGE not only solidifies Qualcomm’s standing in 5G, but also provides some evidence that Qualcomm is able to operate just fine after a recent court ruling against it. In the ruling, Judge Lucy Koh ordered Qualcomm to change its business practices and re-negotiate licensing agreements. But Seymore says that last week’s “announcement with LGE is a good sign that active negotiations are yielding royalty-bearing agreements,” as the agreement shows “negotiations with current and future licensees are continuing despite” the ruling and appeal.
Perhaps the best piece of news for Qualcomm came after the LGE agreement. Late last week, the company said a Court of Appeals had stayed Judge Koh’s ruling, allowing Qualcomm to operate without restrictions during the appeals process. While this does not mean that the decision was overturned, chief counsel Don Rosenberg says he is optimistic that “the court decision will be overturned once the merits of our appeal have been considered.”
Ultimately, however, the word on the Street points to a sidelined majority on Qualcomm. In the last three months, the chip maker has landed six ‘buy’ ratings vs. nine ‘hold’ and one ‘sell’ ratings. The consensus average price target points to $78.93, or nearly 9% upside potential from current levels. (See QCOM’s price targets and analyst ratings on TipRanks)