Qualcomm [NASDAQ: QCOMM]: It’s a good day for Qualcomm investors as the stock is up by over 23%, and is trading at $77 in premarket. This follows their settlement with Apple on a lawsuit on the use of the QCOMM chips. The company has been accusing Apple of using its chips without paying for them, while Apple was accusing QCOMM of implementing an illegal patent monopoly on its products. The settlement is a big deal for QCOMM because it comes with a 6-year patent license and a payment by Apple, even though the amount involved is not yet known.
However, the biggest aspect to this deal is that, it gives Qualcomm an opportunity to go big on 5G. By APPLE agreeing to use QUALCOMM chips, the company has an edge in terms of making it big in the 5G market, which is the next frontier in communications technology.
QUALCOMM already has 5G chips in productions, while Intel is still in the production stage. Considering the massive potential that 5G technology has in the market, Qualcomm has a huge upside potential in the next decade. Apple sells millions of gadgets worldwide and with those gadgets having a piece of QCOMM inside, the revenues for QComm are likely to remain strong.
From a look at the company’s books, there are several factors that support Qualcomm’s growth. One of them is its profit margins. The company has a profit margin 10.15%, which is quite high. This means that with the QCOMM deal, the company’s profits are placed in a good position for strong growth in coming years. With a high and growing profit margin, Qualcomm’s potential to reward investors is pretty high.
The company’s prospects also reflect in analysts’ expectations about it. Most analysts rank it either a buy or a strong buy. On Yahoo Finance, the company has a rating of 2.5 which represents a strong buy by the majority of analysts. Several analysts have also upgraded Qualcomm in their rankings. Morgan Stanley has upgraded it from underweight to equal weight. KeyBanc has also upgraded it to sector weight. Macquarie has upgraded it from neutral to outperform, Rosenblatt from neutral to buy and Cowen & Co. from market perform to outperform. These upgrades reflect the growing potential of Qualcomm to outperform the market. With this deal between the company and Apple, more analysts are likely to upgrade their view of this stock in the market.
In the short-term, the company has broken past its 52-week high at $76.50 in pre-market trading. This is a key resistance level, and the fact that it is broken could see the value of this stock make even more gains once the markets open. Now that the news of this settlement is out there in the open, investors could be looking to take advantage of it once markets open. The key thing is that this stock’s fundamentals give it the impetus to keep growing as long as the market remains on a growth trajectory.