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Top Analyst Dives in on Qualcomm (QCOM) Stock Amid Court Battle

support@smarteranalyst.com (Ben Mahaney)

As investors ponder what to do with Qualcomm (QCOM) stock, many are looking to the courts.

So far in 2019, the chip giant’s stock has largely been moved by events stemming from legal victories or losses. A major win came when the company and Apple entered into an agreement that took care of licensing issues between the two, as well as set the path for Qualcomm to provide 5G technology for the iPhone. But a recent loss came when an antitrust judge ruled against the company, saying it must change its practices — as a result, its stock price has taken a beating. Qualcomm is looking to appeal the ruling, and recently had a stay request denied.

Is now the time to buy Qualcomm stock? Deutsche Bank analyst Ross Seymore recommends investors to stay sidelined, as he maintains a Hold rating on QCOM stock with $80 price target.

As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Seymore has a yearly average return of 26.4% and an 82% success rate. Seymore is ranked #28 out of 5,234 analysts.

The ruling against Qualcomm provides a major challenge to the company’s licensing abilities.  Judge Lucy Koh sided with the FTC, saying “Qualcomm’s licensing practices have strangled competition…” bringing harm to rivals and consumers. Qualcomm is appealing the ruling, but the judge said it must change its business practices, including renegotiating licensing agreements.

The company’s recent stay motion was denied by the US Court of Appeals, but Seymore says the filing shows that the company has already seen “an impact on licensing negotiations.” While the analyst is not surprised that Qualcomm took these steps, he says it “sheds new light on how the District Court's decision is beginning to impact current licensing negotiations.”

Overall, Seymore sees “questions remaining as to how the five remedies ordered in the FTC vs. QCOM (Koh) ruling will impact Qualcomm's QCT and QTL businesses, especially in the near to medium term ahead of decisions by the Ninth Circuit.” The analyst wants clarity on this during the earnings call later this month but believes the “likelihood of litigation expenses [will remain] elevated for the foreseeable future,” as the company continues to battle in court.

All in all, even as the courts aren’t holding it in favor right now, Qualcomm is in good standing with investors. TipRanks analysis of 24 analyst ratings shows a consensus Moderate Buy rating, with 14 analysts saying Buy, nine suggesting Hold and one recommending Sell. The average price target on the stock stands at $85.29, which implies nearly 14% upside above current levels. (See QCOM's price targets and analyst ratings on TipRanks)

 

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