Buy Qualcomm, Inc. (QCOM) Irrespective of the Broadcom Factor

QUALCOMM, Inc. (NASDAQ:QCOM) is in the limelight after Reuters reported that the company is slated to hold a meeting with Broadcom on February 14th, regarding the $121 billion buyout offer placed by the latter. Qualcomm so far has been successful in resisting the hostile takeover attempts by Broadcom. The company has managed to get an additional $8 billion offer in case of a deal blockage. Broadcom has also raised its cash-and-stock offer last week from $70 per share to $82 per share.

We believe that the QUALCOMM, Inc. (NASDAQ:QCOM) bid will benefit Qualcomm shareholders in every situation. The acquisition will give a major boost to the stock price, while a rejection will result in several efforts by the management to increase shareholder value to curb the possibility of future takeover attempts. Recently, investment firm Nomura said in a report that Qualcomm’s management has been “unassertive” and “complacent” in the recent past. The firm believes that the company will start taking steps to make shareholders “happy.” Nomura increased its price target for Qualcomm stock to $75 from $58.

QUALCOMM, Inc. (NASDAQ:QCOM) has a big advantage in the smartphone processor industry. Qualcomm’s Snapdragon line of mobile chips is used by almost every major smartphone company in the world. However, Qualcomm recently got a blow amid Apple’s announcement that it would not use Qualcomm chips in 2018 iPhones. This followed the legal disputes between the two companies. However, analysts think that the loss of Apple as a customer will be offset by the growing demand in the IoT, smart home and driverless cars industries.

Source: Qualcomm Investor Presentation

QUALCOMM, Inc. (NASDAQ:QCOM) is already cutting its reliance on Apple and diversifying its revenue streams. Last month, the company beat analysts’ forecasts for fiscal first quarter. It is important to note that the earnings had no contribution from Apple and another licensee, which collectively contributed about $740 million in high margin royalties in the previous quarters. Chip’s unit revenue jumped 13% to $4.6 billion, while earnings before tax jumped 32% year-over-year to $955 million.

Analysts are also bullish on QUALCOMM, Inc. (NASDAQ:QCOM) recent deal with Samsung over mobile devices and infrastructure equipment. Under the agreement, Qualcomm agreed to expand its global patent cross-license agreement with Samsung covering mobile devices and infrastructure equipment. Samsung also agreed to withdraw interventions before the Korean Fair Trade Commission, which hit Qualcomm with an $850 million fine. Analysts think that Samsung’s withdrawal will help Qualcomm in winning the appeal to avoid a fine.

Qualcomm stock is up over 20% over the last six months.

Free books, reports and subscriptions...