When MOFCOM failed to approve the buyout of NXP Semiconductor (NASDAQ: NXPI) by Qualcomm (NASDAQ: QCOM), the latter’s stock jumped above $60 a share and never looked back. Favorable valuations and positive prospects ahead suggest the stock will continue climbing higher.
Qualcomm trades at a forward P/E of under 16 times. Despite the strong prospects for the Snapdragon processor sales, the stock is held back from litigation from Apple (NASDAQ: AAPL). Fines by countries that claim Qualcomm acting like a monopoly is not helping, either. QCOM’s $2 billion payout to NXPI after the deal fell apart, plus a ~$1 billion payout to BlackBerry (NASDAQ: BB) to refund unused royalty sent the stock lower this year. QCOM stock finally bottomed below $50 a share in May. And now that the company will grow on its own, without the analog solutions from NXPI, investors are fine with the company’s prospects.
Per Tipranks analysts have a price target of $66.36, suggesting little additional upside in the stock. More recently, an RBC Capital analyst reiterated a $73 PT on QCOM stock. The optimistic view on the company is justified. QCOM reported earnings of $1.01 on July 25, sharply above the $0.70 consensus. It announced a plan to buy back $30 billion worth of shares, a move that should increase EPS by ~ $1.50.
Takeaway
Qualcomm’s still undervalued at these levels. NXPI will recover after the $127.50 offer was withdrawn.
