As of last Wednesday’s meeting, the QCOM Board continues to be unanimous that AVGO’s $82 proposal not only meaningfully “undervalues” QCOM, but also carries massive regulatory among other risks.
Daryanani asserts: “We note the incremental positive is AVGO’s willingness to agree to certain potential antitrust-related divestitures beyond the terms in the merger agreement (more flexibility about what might get divested). In addition to the bid price, we think QCOM’s major concern about the proposed transaction remains AVGO’s intention for QTL and AVGO’s request for controlling all material decisions regarding QTL during the ~18-month period between signing and a potential closing, which could be disruptive to the licensing business operation. Additionally, QCOM maintains $8B break-up fees are not enough to protect its shareholders from risks of agreeing to a transaction that may not be closed. Net/net: We think the saga continues. The next step will be NXPI approval from MOFCOM, what does QCOM eventually do with its $110 bid and the upcoming QCOM shareholder meeting.”
By the analyst’s assessment, the last regulatory “hurdle” for the QCOM/NXPI merger: MOFCOM. Daryanani wagers this will take around 3 weeks for the tender process on the heels of QCOM gaining a green light from MOFCOM. Following the MOFCOM approval, Daryanani eyes better and better odds for QCOM to throw a more expensive bid for NXPI- potentially $125; especially given NXPI’s latest positive earnings showcase along with “sizable” prospective accretion.
Though AVGO marks $82 per share as its “best and final” offer, the analyst angles for “room to improve” should QCOM not close the NXPI transaction.
“Sticking” with the bulls, the analyst reiterates an Outperform rating on QCOM stock with an $80 price target, which implies a 23% upside from where the shares last closed.
Amit Daryanani has a very good TipRanks score with an 85% success rate and a high ranking of #12 out of 4,759 analysts. Daryanani garners 29.2% in his annual returns. However, when recommending QCOM, Daryanani forfeits 1.6% in average profits on the stock.
TipRanks suggests a largely optimistic analyst consensus betting on the chip giant’s opportunity in the market. Out of 12 analysts polled in the last 3 months, 8 are bullish on Qualcomm stock while 4 play it safe on the sidelines. With a return potential of 49%, the stock’s consensus target price stands at $96.82.