The NXP Factor
While Qualcomm continues to work on closing its $47 billion acquisition of automotive chipmaker NXP Semiconductors NV (NASDAQ:NXPI), at the CES 2017, NXP showcased why the company is a major force in automotive computing. At the show, NXP Semiconductors NV (NASDAQ:NXPI) partnered with several companies to demonstrate a “collective vision of safe and secure end-to-end mobility through a highly automated driving demonstration and experience.” NXP Semiconductors NV (NASDAQ:NXPI) also demonstrated its so-called RoadLINK platform in collaboration with automotive parts giant Delphi and privately held start-up Savari, highlighting the traffic safety improvements one can achieve through the platform.
IoT semiconductor and sensor demand is set to skyrocket in 2017 according to an analyst on Forbes (2). Quoting from the Forbes article, “NXP is one of the best positioned IoT semi vendors, and if a deal with Qualcomm is completed, I believe the combined company has the breadth of technologies and capacity to really dominate the IoT market.” The NXP merger could bring strong growth opportunities for the smartphone chip giant, which has been hit by slowing growth. (See Also: Is Qualcomm Inc (QCOM) Stock A Better Bet Than Intel Corporation (INTC) Stock?).
QUALCOMM, Inc. (NASDAQ:QCOM) was fined $850 million by South Korea for its patent licensing practices. Some may see it as a huge setback to the chipmaker, but Qualcomm may not suffer any irreparable damage. A good reference point is China’s NDRC settlement with Qualcomm, which imposed a similar fine on the chipmaker but didn’t have a substantial impact on the company’s business prospects. These are regulatory risks, and form a part of the cost of doing business.
Decisions like these should not be perceived as a great risk. As a matter of fact, following the settlement with China, new licensing deals in the country became a key driver of Qualcomm’s impressive Q4 financial results, in which investors saw Qualcomm’s net income rise by 51 % YoY to reach $1.6B. Further, Meizu is the latest Chinese smartphone maker to sign a licensing deal with Qualcomm after Vivo and Oppo as well as Hisense, Yulong, and Lenovo. This indicates that Qualcomm is reviewing and improving its patent licensing practices.
Putting It All Together
Investors who bought into QCOM stock last quarter are very likely to be disappointed right now. However, things may not be as bad for the chipmaker going forward. Investors here need to be patient and tread with caution because technical indicators (3) suggest the stock may be in for a correction. As on 4th Jan, Qualcomm stock breached its 50-day moving average and was challenging its 100-day moving average, which means that the stock could transition into an intermediate-term bearish trend. If the stock falls below the $65 mark, the next target could be $60.
However, that doesn’t mean that Qualcomm is a bad investment, because it has numerous growth opportunities ahead of it, in data centers, Internet of Things, and in connected cars. The average analyst consensus price target is $73 with an upside of 11.37% from yesterday’s close price. However, it might be better to wait for any pullbacks to take positions in QCOM stock. 2017 could be the year when it may breach the $80 mark given its growth opportunities. The fact that Qualcomm has seen the biggest increase in ownership by active fund managers in Q4 is also encouraging.
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The article Will QUALCOMM, Inc. (QCOM) Stock Soar To New Highs In 2017? originally appeared on amigobulls.com. Watch our analysis video on QCOM
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