The share price of Delaware-based semiconductor firm Qualcomm surged past the $100-mark on Thursday last week, opening at $102.33 per share. It managed to break its former record high, which it had set more than two decades ago. The surge came right after the company announced that it had reached a licensing settlement with Chinese tech giant Huawei Technologies, paving the way for its full 5G standard rollout.
Qualcomm's stock continued to trade above the $100 mark on Friday. The company previously set a record high of $100 per share in January 2000, right before the dot-com crash. Qualcomm has been struggling to reach that level ever since. Since the start of the year, Qualcomm's share prices have increased by more than 21 percent.
The company's licensing settlement with Huawei comes just a year after it had settled its dispute with Apple. Under the settlement, Huawei has agreed to pay Qualcomm $1.8 billion in licensing back payments, adding a substantial amount to the company's profits for its current quarter. Apart from the back royalties, Huawei is also expected to pay between $200 million to $250 million in Qualcomm technology licensing royalties per quarter moving forward.
Last week, Huawei revealed that it had managed to surpass South Korea's Samsung Electronics to become the world's largest smartphone supplier. Samsung's overall smartphone sales during the second quarter dropped massively amid the continued global supply chain disruptions caused by the coronavirus pandemic.
The announcement of Qualcomm's settlement with Huawei was made during the company's second-quarter earnings call. For the period, the company reported revenues of around $6.3 billion, beating average analyst estimates of $5.7 billion. Taking into consideration Huawei's back payments, Qualcomm's revenues for the period will technically be around $8.1 billion. Profits for the quarter, excluding some items, are reportedly between $1.05 and $1.25 cents per share.
Given its better-than-expected performance for its latest quarter, average price targets for Qualcomm had increased from $98.48 to $113.24. Out of the 29 analysts tracking Qualcomm's stocks, 18 have listed it with a "buy" rating.
Analysts have pointed out that Qualcomm's settlement with Huawei is a massive milestone for the company as it does set it up to be a major supplier in the global 5G rollout. Now that it has repaired its relationship with both Apple and Huawei, the company's continued profitability with the 5G network segment under its QTL business model. Other analysts have warned that Qualcomm's business could still face headwinds in the future, particularly from possible adverse FTC rulings and uncertainties involving the rate of adoption globally of 5G technologies.
