2020 has been a good year for chipmaker Qualcomm (QCOM), and it just got better. After an estimate-beating fiscal Q3 report, Qualcomm inked a deal with Huawei which resolved a long-standing patent licensing dispute, removing the final legal overhang standing in its way.
On Tuesday August 11, a U.S. Appeals Court reversed a U.S. District Court decision that handed the Federal Trade Commission (FTC) a victory in a 2019 antitrust case against the world’s largest mobile chipmaker.
The FTC had claimed Qualcomm was guilty of using “anticompetitive tactics” when licensing its wireless technology and was attempting to monopolize the modem chip market. However, the U.S. Court of Appeals found that Qualcomm’s practices did not amount to undermining competition.
For Deutsche Bank analyst Ross Seymore, the decision “removes the last major litigation risk facing the company.”
The 5-star analyst went on to say, “While this decision does not positively impact our financial estimates, it does remove negative optionality and thereby further decreases uncertainties surrounding QCOM’s business model (especially QTL). When combined with the recently settled licensing negotiation with Huawei, we expect investors to increasingly focus on the company’s strong positioning within 5G (share gains in modems, RFFE, etc.) and the potential upside to consensus estimates that we expect QCOM to deliver.”
Seymore also adds the verdict should “increase investor willingness to place a valuation on QCOM shares that is more in line with peers.” Despite being up by 31% year-to-date, QCOM has been unable to match the outstanding performances of other highflyers in the semiconductor sector. Ultimately, Seymore believes the decision will elevate Qualcomm to its peers’ level, and considers the chip giant as part of a “rare group of semiconductor stocks that can benefit from upside to both fundamentals and valuation.”
It comes as no surprise to learn Seymore has a Buy rating on QCOM shares. He also gives the price target a bump – up from $115 to $127. Investors could be pocketing a 12% gain, should Seymore’s forecast play out over the coming year. (To watch Seymore’s track record, click here)
Qualcomm also gets a fair amount of support from the Deutsche Bank analyst’s colleagues. With 13 Buys, 7 Holds and 1 Sell, QCOM has a Moderate Buy consensus rating. Going by the $117.59 average price target, the analysts expect shares to appreciate by 4% in the months ahead. (See Qualcomm stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment
