Qualcomm Stock: Falling Amid Apple & NXP Fights

Posted On September 22, 2017 1:21 pm

Qualcomm Display

QUALCOMM, Inc. (NASDAQ:QCOM) remains under pressure amid the effects of Qualcomm’s legal battles with Apple. In the third quarter, Qualcomm’s licensing revenue decreased by 42% to $1.17 billion. The stock is down about 20% since the start of this year. The company’s 2018 profit estimates have also been dented due to the dispute. Earlier this month, the Qualcomm stock took another hit after a San Diego judge rejected Qualcomm’s appeal to force Apple to limit legal claims to U.S to prevent the company from filing lawsuits in China, Japan, Taiwan and UK.

Qualcomm's Cash Flow

Qualcomm’s OCF Nosediving

Out of 26 analysts, 17 have a “Hold” rating for Qualcomm stock. Most of the analysts are in the “wait and see” mode regarding Qualcomm. Most of these analysts are waiting for a final decision regarding the royalty payments case.

However, Qualcomm is set to come out of the current pressure as it will ultimately receive the royalty payments from Apple. Qualcomm’s position in its legal battle with Apple is strong. The company is also expected to receive outstanding payments from some other OEMs. In the most recent quarter, Qualcomm’s chip sales increased by five percent. In the long run, Qualcomm is expected to benefit from its NXP Semiconductors acquisition. NXP is a Netherlands-based company that operates in the IoT and driverless cars sectors.

Analysts believe that driverless cars and 5G cellular networking are two of the primary assets for Qualcomm. However, it should be noted that Qualcomm’s buyout of NXP is facing a lot of difficulties. EU antitrust regulators have put the deal on hold as they demand both parties to provide additional details regarding the transaction. However, if the deal goes through, Qualcomm will be able to slash its reliance on the royalty-free business model, as it will become a major supplier in the automotive chips industry in Europe and the US.

Qualcomm now has another hurdle to cross: activist investors, who are actively buying positions in NXP to raise the price of the deal. Dan Loeb and Elliott Management’s Paul Singer recently acquired stakes in NXP. They plan to force Qualcomm pay more for the deal.

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