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Qualcomm stock skyrocket after Huawei settlement, analysts see more gains ahead

Qualcomm stock

Qualcomm (NASDAQ: QCOM) stock price soared more than 15% after reporting stronger than expected results for the third quarter.

The shares of the semiconductor company also got support due to the announcement of a lucrative patent dispute settlement with Huawei– which the majority of analysts believe would contribute significantly to revenue and earnings per share.

Qualcomm announced a settlement with Huawei this month and it also reached a new long-term global patent license agreement. The company says Q4 outlook assumes royalties due on Huawei sales as well as $1.8bn in revenue from previous due royalties.

QCOM QUALCOMM Incorporated daily Stock Chart
Qualcomm stock price performance. Finviz.com chart.

Its third-quarter revenue of $4.9bn topped analysts’ consensus estimate by $100 million while earnings per share of $0.86 have beaten consensus by $0.15 per share.

Its QCT segment revenue surged 7% year over year to $3.8bn and earnings before tax spiked 20% to $603M. On the negative side, QCOM’s QTL segment reported revenue of $1.04bn, indicating a decline of 19% Y/Y.

Although Qualcomm’s fourth-quarter outlook assumes a 15% year over year reduction in handset sales, the company still looks extremely optimistic about the future fundamentals of 5G supported phones.

“In China, just midway through the calendar year and despite the impact of COVID-19, 5G now represents the majority of domestic mobile phone shipments,” the chief executive officer, Steve Mollenkopf said.

In the month of June, domestic 5G smartphone shipments in China accounted for 63% of entire smartphone shipments.

Meanwhile, QCOM has aggressively been working with the mobile ecosystem to provide top-rated technical help to improve the adoption of 5G to new industries.

Qualcomm stock price is currently trading at a record high of $107, but market analysts are seeing more gains for the semiconductor company. KeyBanc’s John Vinh has provided a price target of $125 and Raymond James’ Chris Caso raised the price target to $120. Moreover, Morgan Stanley analyst Joseph Moore expects Huawei settlement to add over 10% to EPS.

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