Since announcing a $1.8 billion settlement deal with Huawei Technologies and presenting its sales forecast for the third quarter, Qualcomm Inc.'s (QCOM) stock increased 12 percent in after-hours trading.
The stock closed at $107.19 during extended sessions Thursday as the world's largest mobile semiconductor maker disclosed it had reached a settlement deal, as well as a new global multi-year patent licensing deal with Huawei.
Sales excluding certain products are expected to hit $5.5 billion to $6.3 billion in the period ending September, the tech group said in a statement on Wednesday. Analysts, on average, anticipate $5.77 billion, according to figures compiled by Bloomberg. Including back payments from Huawei, revenue would be $7.3 billion to $8.1 billion, Qualcomm stated.
The San Diego-based tech firm said it resolved a licensing discord with Huawei, which will pay Qualcomm a catch-up of $1.8 billion in the fourth quarter. While Huawei is still restricted from acquiring Qualcomm's processors under U.S. regulations, the company has now resumed paying licensing fees for its wireless technology, Qualcomm disclosed.
Of the 29 market observers who monitor Qualcomm, 18 have placed Buy or Overweight ratings, eight have Hold ratings, and three placed Sell ratings. Of those, 18 increased their price goals, resulting in an average price target of $113.24, rising from a previous $98.48, FactSet data revealed.
Late Wednesday, it was also reported that China's Huawei had topped South Korea's Samsung Electronics as the biggest supplier of smartphones in the world due to major supply disruptions caused by the ongoing global health turmoil.
On top of the $1.8 billion catch-up payment of back royalties, Susquehanna analyst Christopher Rolland estimates Huawei will pay $200 million to $250 million in Qualcomm technology licensing. Rolland has a positive rating on Qualcomm and increased his price target to $125 from $110.
The company disclosed that it estimated its 5G mobile deliveries would be 15 percent lower year-on-year in the fourth fiscal quarter, citing a launch deferment from one of its clients. The group expects to roll out between 175 million and 225 million 5G units this year.
Various challenges are going against the semiconductor behemoth, including frictions escalating between the world's two biggest economies and a coronavirus pandemic. China is one of the most crucial markets for Qualcomm, but doubts in trade regulations have forced Chinese tech groups to turn to local companies for processors they used to buy abroad.
Looking ahead, Qualcomm issued a guidance for fourth-quarter adjusted sales to be in the $5.5 billion and $6.3 billion range, against Wall Street's projections of $5.78 billion.