Malcolm Owen
Qualcomm's share price still has some space for growth following the surprise settlement with Apple, Morgan Stanley suggests, with the price potentially able to grow by another 15% due to both supplying Apple with modems and being a central figure in the creation of 5G networks.
Last week's settlement between Apple and Qualcomm to end a series of patent licensing and infringement lawsuits is thought to have been an overall win for the chip maker, with it gaining favorable licensing terms from the iPhone maker as well as supplying modems and receiving a one-time payment of an undisclosed amount.
While Qualcomm's share price rose quickly in the wake of the announcement, seeing it go up by about 20% on the day itself and continuing to climb, Morgan Stanley advised in an investor note seen by AppleInsider it could go higher. The market has seemingly not yet adjusted the price of the stock, with Morgan Stanley believing it could rise another 15%, to a target price of $95.
Terms of the agreements were not revealed by either company, but it is speculated Apple may be paying between $8 and $9 per iPhone to Qualcomm for licensing. The one-time payment is also thought to be in the region of billions of dollars.
"The Apple agreement structure is very consistent with what we thought it should be," Morgan Stanley writes, "However, we were very surprised that Apple chose to settle now and return to what we estimate had been roughly the status quo, instead we had expected that Apple would wait to see if the courts would have it more negotiating leverage."
As a major proponent for 5G, Qualcomm's position is thought to be one of the reasons why Apple capitulated in a settlement, in order to have 5G modems available for a future iPhone model.
"We think Qualcomm's new horizons in 5G opportunities are relatively cheap/free options post-Apple settlement," suggests the firm, adding "Qualcomm enjoys a range of under-appreciated options outside handsets that have the potential in the long run to make Qualcomm perhaps the largest semiconductor company in the world."
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7 Comments
Sell the news - trading 101
Bought seconds after the decision was announced, had nice gains so far :)
All analysts are simply assuming Apple capitulated to Qualcomm instead of Qualcomm capitulating to Apple.
The primary disclosure Qualcomm didn’t want to occur is having its licensing practices becoming known to all of its customers.
Avoiding that discloure would not have been possible had Qualcomm chosen to continue with the court trial.
Apple doesn’t care how Qualcomm treats any company other than Apple. Apple agreeing to pay past due licensing fees is most likely the one-time fee mentioned. Agreeing to announce a 6-8 years licensing agreement for unspecified chips at an unspecified amount helps Qualcomm remain in business a while longer.
Yes, Apple will have to withstand being portrayed the loser. This path is much easier for Apple than Qualcomm because Apple’s short-and long-term viability isn’t going to crumble over 5G as Qualcomm’s would.
I expect more analysts will chime in with their “Apple caved” analyses as Apple’s quarterly earnings reporting approaches and as the FTC verdict approaches.
I do believe Apple will end up coming out on top here, eventually. Let's hope this circus has forced Qualcomm to re-evaluate it position of power in the marketplace. Greed never wins.
Unfortunately, the settlement might drain the case against QCOM for violating FRAND. That would have massive implications for FRAND agreements generally.