[ TECH - NEWS ] Qualcomm's Increased 5G Price

Dinesh Vishwakarma

Why Qualcomm's Increased Our Price Estimate For Qualcomm To $84 Per Share[br][br][br] [br][br]We have increased our price estimate for Qualcomm  (NASDAQ:QCOM) from $58 per share to about $84 per share, following the company’s surprise settlement with Apple (NASDAQ:AAPL)on their two-year long licensing dispute in mid-April. Below, we take a look at how the settlement benefits Qualcomm and the rationale behind our price increase.[br][br]Settlement With Apple Removes Uncertainty Around Tech Licensing Business, Improves Outlook[br][br]The litigation with Apple was taking a meaningful financial toll on Qualcomm, with its adjusted EPS falling by about 14% over the last fiscal year due to a lack of high-margin royalty payments from Apple. With the settlement, Apple will make a one-time payment of between $4.5 to $4.7 billion to Qualcomm in Q3 FY’19, while forging a six-year agreement to license Qualcomm’s patents, effective from April 1, 2019, with a two-year option to extend. We expect Qualcomm Technology Licencing revenues to rise to about $7.5 billion in FY’20, as the deployment of 5G ramps up. Overall, the settlement should remove much of the uncertainty surrounding Qualcomm’s high-margin technology licensing business, as a potential loss against Apple could have set a precedent, jeopardizing Qualcomm’s lucrative licensing model.[br][br]QCT Business Benefits From New Supply Deal With Apple[br][br]Qualcomm’s also forged a new deal to supply Apple with baseband chips. This should bode well for the QCT (Qualcomm CDMA Technologies) business, which saw revenues drop 20% in Q1’19 following Apple’s shift to Intel modems on its 2018 flagship iPhones. Apple is the largest mobile vendor by revenue with ~$160 billion in annual iPhone sales (FY’18), and having Apple as a customer will be crucial to Qualcomm’s growth in the 5G era. We estimate that QCT revenues will grow to about $18 billion by FY’20, with chipset shipments rising to $775 million and average selling prices rising to about $23 per unit. Qualcomm for its part has indicated that the chip supply agreement would help improve its EPS by $2 as shipments to Apple scale-up.[br][br][br] [br][br][br]Source: Forbes

jk885884

Nice share