Why NXP Shareholders Are Set to Thrive Without a Qualcomm Acquisition
Shares of NXP N.V. (NXPI) are climbing as investors navigate the ongoing tussle with Qualcomm, signaling strong prospects even if the deal falls through.
(Disclaimer: The author is a financial analyst and portfolio manager who holds shares of NXPI along with clients.)
NXP N.V. (NXPI) stock has been gaining momentum amid shareholder efforts to pressure Qualcomm Inc. (QCOM) to increase its $110 per share offer. However, with NXP currently trading near $118, about 7% above Qualcomm's bid, market sentiment suggests NXP is well-positioned to succeed independently if the acquisition does not materialize.
Independent of Qualcomm, NXP boasts a robust product lineup in rapidly expanding markets like automotive semiconductors and wireless technologies. In Q3 2017, NXP reported revenues of $2.28 billion, with automotive chips contributing 41%, reflecting an 11% year-over-year growth. (For further insights, see: Qualcomm's Bid for NXP Faces Investor Resistance.)
Promising Growth Outlook
Analysts project earnings growth of 11% in 2018 and 9% in 2019, indicating healthy expansion assuming estimates remain steady despite acquisition uncertainties. NXP trades at a reasonable multiple of 14.8 times the 2019 earnings forecast of approximately $7.98, according to YCharts data.
Market Dynamics and Competitive Moves
A notable development is Broadcom Ltd.'s (AVGO) bid to acquire Qualcomm, signaling a preference for Qualcomm to abandon its pursuit of NXP. Qualcomm may face pressure to finalize the NXP deal as a strategic defense against Broadcom’s advances. Previous analyses suggest Qualcomm might need to raise its offer to as much as $145 per share to fully capture NXP's value.
Performance Snapshot
According to YCharts, NXP's stock performance in 2017 lagged behind its semiconductor peers. Over the last 52 weeks, NXPI shares rose roughly 21%, compared to nearly 52% gains for Broadcom and a 45% increase for the iShares PHLX Semiconductor ETF (SOXX).
Currently, investors await further developments, but resolution appears imminent.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment advisor, and manages the Thematic Growth Portfolio, focusing on long-term holdings of three to five years. For more about Kramer and his portfolio, click here. This information is educational and not an offer or solicitation to buy or sell securities. Investing involves risks and is not guaranteed. Consult a financial or tax professional before implementing any investment strategy. A list of all recommendations from the past year is available upon request. Past performance does not guarantee future results.
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