Qualcomm Soars on Accelerated $16 Billion Buyback Program
Analysts are jumping back in the game on Qualcomm, Inc. (QCOM) as it announces an accelerated share buyback program with major banks.
The San Diego-based chip maker's stock soared 3.9% as of 10:03 a.m. in New York following the company announcement, which outlines an accelerated $16 billion share buyback program that will help build toward a projected $30 billion total buyback.
The repurchase agreements that have been reached with Bank of America Corp (BAC) , Citigroup Inc (C) , and Morgan Stanley (MS) will transfer 178 million shares to the banks in exchange for the $16 billion.
"We are pleased to initiate this significant accelerated share repurchase as we continue to execute on our previously announced $30 billion stock repurchase program," Qualcomm CEO Steve Mollenkopf said in a statement. "We remain on track to complete a large majority of the announced program by the end of fiscal 2019."
Qualcomm has pursued the $30 billion share repurchase since July in order to make up for the company's failed acquisition of NXP Semiconductors NV (NXPI) .
The deal, in which Qualcomm sought to takeover the Dutch semiconductor company for $44 billion, was suspended in late July after it met resistance from Chinese regulators.
As a result, the company moved to increase its $10 billion share repurchase program to $30 billion by the close of 2019.
Analysts Back on Board
Barclays PLC analyst Blayne Curtis explained that the buyback program, along with cost cuts, is an important "first step" in moving the company toward his price target of $95 in a note this morning.
The buy rating and bullish price target from Curtis reinstates his coverage of the stock, which was previously suspended.
While he stated that the company's buyback program is an important first step and a motivating factor for coverage, Curtis explained that there are more prominent reasons to own the stock in the long term.
"We are modeling the $30 billion buyback and cost cuts, but the reason to own the stock is for possible licensing resolutions and the 5G ramp adding $2.80-$3.60 to earnings per share," he wrote.
Curtis further explained that upside potential at Huawei Technologies Co, Ltd. and Apple, Inc. will help contribute to significant growth for the company.
"The near term is a little noisy as known (AAPL) loss flows through," he wrote. "But the reason to own the stock is the upside to model given potential resolutions at Apple and Huawei, large buybacks, and ramp of 5G driving material."