Confidence is building over NXP Semiconductors (NASDAQ: NXPI) getting bought out from Qualcomm (NASDAQ: QCOM) for $127.50 a share. China’s recent approvals for other various deals are giving shareholders confidence that the country will approve the buyout. If and when that happens, buying the stock at the $91 low in recent sessions will prove very profitable.
China approved Toshiba’s chip sale to a US-based consortium on May 17. The move suggests that China will soften up its stance against Qualcomm. Currently, China officially voiced concerns over its desire to buy NXP Semiconductor. That message has pushed Qualcomm’s expectations for approval back to the summer time frame. But the critical talks about trade negotiations between the US and China in Washington will ultimately decide the outcome of the QCOM-NXPI buyout. ZTE’s business is in shambles until the US lifts the penalties held against it.
The US is in a negotiating advantage at the moment because ZTE, which employs tens of thousands of workers in China, cannot operate globally with the U.S. against it. The House committee rebuke will vote next month. Until then, even though chances are improving for the NXPI-QCOM deal, uncertainties will create selling in NXPI stock.
Without any deal yet, NXP and Qualcomm are both trading at distressed discounts. NXPI stock is valued at 13.7 times earnings. Its future growth in autonomous vehicles, IoT, and markets outside of smartphones have tremendous growth ahead. Qualcomm’s legal troubles against Apple (NASDAQ: AAPL) have yet to be resolved but this will eventually get resolved.
