Cowen Boosts PT on Qualcomm (QCOM) to $74 Amid NXP Semi (NXPI) Chatter; Xilinx (XLNX) Also Seen as Potential Suitor
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Analyst Tim Arcuri commented late Thursday,
With smartphone units having slowed, QCOM re-trenching somewhat in China to the mid to higher end, and a diversified modem strategy from AAPL, we believe QCOM needs to expand into new growth areas. IoT/connected everything is the most fertile ground for synergy, in our view, with QCOM's current efforts as the 5G standard takes shape. While many IoT devices will be low ASP commodities, Automotive and Industrial are IoT verticals that we see as more profitable for semiconductors, and this is precisely the exposure that QCOM would gain with an NXPI deal. With NXPI’s sensor, analog, and in-car/industrial networking capability combined with QCOM’s processing and connectivity solutions, QCOM could become the dominant player in connected industrial/automotive applications and could gain even further leverage in defining the 5G ecosystem. Additionally, the impact on QCOM's stock should be positive as the incessant focus on smartphone units - most specifically iPhone - would be significantly mitigated and QCT should also get a much better multiple in a SOTP as a result.
As for another potential NXPI bidder, Broadcom (Nasdaq: AVGO) is the most obvious but Xilinx (Nasdaq: XLNX) seems like a better deal for AVGO as 1) timing is not quite right (it seems a bit too soon for AVGO to take on another deal of this size); 2) NXPI already has a lot of debt even post RF and standard products divestiture; and 3) XLNX would be easier to significantly cut opex.
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