Qualcomm stock spikes toward record high after Huawei settlement boosts earnings forecast

Qualcomm stock spikes toward record high after Huawei settlement boosts earnings forecast

Stock set to break all-time high of $100 on Thursday

Qualcomm Inc. shares rocketed toward record highs in the extended session Wednesday after the chip company projected a big jump in profit and revenue in the current quarter thanks to a settlement with Chinese tech giant Huawei Technologies Co.

Qualcomm QCOM, +1.72% shares surged as much as 14% after hours, following a 1.7% increase in the regular session to close at $93.03. Shares topped $106 in the after-hours session. Qualcomm’s stock briefly touched $100 in intraday trading on Jan. 3, 2000, just before the dot-com crash, and has not hit triple digits since. The stock reached an all-time closing high of $95.91 some 20 years later on Jan. 17.

With the long-awaited patent-license settlement with Huawei, which Qualcomm had teased in its year-ago earnings call, Qualcomm expects unadjusted fiscal fourth-quarter earnings of $2.12 to $2.32 a share on revenue of $7.3 billion to $8.1 billion, well ahead of analysts’ estimates. But as with Qualcomm’s settlement with Apple Inc. AAPL, +1.91% recorded a year ago, those results will include the effect of the settlement with Huawei.

The Huawei settlement will add about $1.8 billion in revenue and $1.38 in earnings per share, the company said. After adjusting for the one-time Huawei windfall, Qualcomm said it expects adjusted earnings of $1.05 to $1.25 a share on revenue of $5.5 billion to $6.3 billion. Analysts had forecast adjusted earnings of $1.09 a share on revenue of $5.76 billion.

“With the signing of the Huawei agreement we are now entering a period in which we have multiyear license agreements with every major handset OEM,” Steve Mollenkopf, Qualcomm chief executive, said on the conference call.

The settlement includes money that is owed Qualcomm from previous quarters, as well as a new long-term, global patent-license agreement, Qualcomm said.

Net income and revenue from the year-ago period was adjusted by excluding licensing revenue gained in a settlement from Apple Inc. AAPL, +1.91%

The company reported fiscal third-quarter net income of $845 million, or 74 cents a share, compared with $2.15 billion, or $1.75 a share, in the year-ago period. After adjusting for stock-based compensation and other effects, earnings were 86 cents a share, compared with 80 cents a share in the year-ago period.

Adjusted revenue was essentially flat — $4 million lower — from last year’s $4.89 billion.

Analysts surveyed by FactSet had forecast adjusted earnings of 71 cents a share on revenue of $4.81 billion.

Of the 29 analysts who cover Qualcomm, 18 have buy or overweight ratings, eight have hold ratings, and three have sell ratings, with an average price target of $98.48, according to FactSet data.

At Wednesday’s close, Qualcomm shares were up 5.4% for the year, compared with a 14% gain in the PHLX Semiconductor Index SOX, +2.22%, an 18% gain for the tech-heavy Nasdaq Composite Index COMP, +1.35%, and a 0.9% rise by the S&P 500 index SPX, +1.24%. 

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