Though shares of Qualcomm (NASDAQ: QCOM) are sharply below the $65 level after the U.S. government blocked Broadcom (NASDAQ: AVGO) from buying it, the stock is starting to bounce back from renewed go-private chatter. Investors have two trades to consider: NXP Semiconductor (NASDAQ: NXPI) getting bought out and QCOM stock rising.
NXPI Buyout Improving
Qualcomm raised its buyout price for NXPI stock but that did not stop its stock from plunging from $126 to around $113 last week. The market may be pricing in heightened risks of a breakdown in the buyout following Paul Jacobs move to buy the company. The former chairman of the company needs to find partners who fund the deal. If successful, it could lead to a nixing of the NXPI buyout. The long-term implications of the deal breaking is negative. Qualcomm needs NXP’s know-how in microcontrollers, processors and sensors in the automotive, connected devices and IoT markets. Without it, Qualcomm will rely too heavily on the chip and modem markets in mobile.
The business for CPUs in the mobile market is not necessarily bad but it limits QCOM’s potential. Slowing smartphone demand, saturation in mobile phones and Apple’s (NASDAQ: AAPL) challenge to royalty rates add to the risk of holding QCOM stock.
Takeaway
NXPI’s buyout from QCOM is ultimately likely, assuming Qualcomm is successful in ending Jacobs’ bid to take the company private. QCOM will get the approval from regulators, letting the company move forward.
The upside potential in NXPI stock is around 10%.
