Following Qualcomm’s (NASDAQ: QCOM) shareholders meeting, chances are higher that the stock could fall to $50 or lower. While the 14 times forward P/E on the stock makes the stock look inexpensive, risks are rising. The smartphone components supplier faces a judgment that could change the value of its business.
The government’s interference in the Broadcom (NASDAQ: AVGO) acquisition of Qualcomm removes the buyout premium in the stock. Calls for a buyout of $80 - $85 from Broadcom are no longer applicable: Broadcom may not buy Qualcomm at any price.
Second, Qualcomm faces multiple anti-trust suits. It must spend the resources and the time to defend its business practices. If it fails to prove that it operates like a monopoly for its patents, its customers, especially Apple (NASDAQ: AAPL), markets will assume lower royalty from its IP in the months ahead.
Unfavorable Shareholder meeting
Voting support for directors was dismal and from the 40 – 50% range. That lack of support suggests the company needs new leadership to steer the company. The slow closing for NXP Semiconductor (NASDAQ: NXPI) adds to Qualcomm’s uncertainty. The stock has room to keep dropping to adjust for the uncertainties. At a lower forward P/E of 12-13 times, the stock would trade at around $50.
