Qualcomm (QCOM) has secured a major win after the European Union’s (EU) second-highest court rescinded a €997 million fine imposed on the company for alleged antitrust violations four years ago. The fine came amid claims that the tech giant made payments to Apple (AAPL) to be its chief supplier of chips for iOS products.
General Court’s Ruling
In its 2018 ruling, the European Commission (EC) alleged that Qualcomm paid billions of dollars to sway Apple to continue using its chips in iPhones and iPads. The Commission also reiterated that the payments went to block fair competition from the likes of Intel (INTC).
The General Court in its ruling reiterated that the Commission committed several irregularities while filing its case against the chip giant. According to the court, procedural irregularities affected Qualcomm’s rights to defense.
The Big Blow
The €997 million fine was one of the several fines imposed by the antitrust agency. Some of the companies targeted over anti-competitive behavior include Alphabet’s (GOOGL) Google, banks, and truck manufacturers. The EU antitrust agency is also investigating Apple, Amazon (AMZN), and Meta Platform’s (META) Facebook over similar claims.
The second-highest court annulling the €997 million fine on Qualcomm could be a big blow for the EC. It is also the second major defeat for the Commission after the court refused to back a €1.06 billion fine on Intel earlier in the year.
While Qualcomm has welcomed the ruling, a spokesperson for the EC said that they will study the ruling to assess possible next steps. The competition enforcer can appeal the ruling to the EU Court of Justice (CJEU).
Wall Street’s Take
KeyBanc analyst John Vinh has reiterated a Buy rating on Qualcomm stock and raised the price target to $220 from $200, implying 67.9% upside potential from current levels. According to the analyst, the chip giant could be the sole source for Samsung’s next-generation flagship GS23 smartphone in 2023.
The Street is confident about the stock, with a Moderate Buy consensus rating based on 12 Buys and seven Holds. The average Qualcomm price forecast of $193.2 implies a 47.6% upside potential from current levels.
Bloggers’ Opinion
TipRanks data shows that financial bloggers’ opinions are 94% Bullish on QCOM, compared to a sector average of 66%.
Key Takeaway for Investors
Qualcomm’s big win in Europe should help ease regulatory pressure that has taken a significant toll on investor sentiments in the sector. However, the company is not yet out of the woods as the EU Commission can appeal the ruling at the highest court.
Read the full Disclosure.
