InterDigital (IDCC): Huawei Deferred Revenue Is More Important Than The Revenue Miss - B.Riley

B. Riley analyst, Eric Wold, reiterated his Buy rating on shares of InterDigital Inc. (NASDAQ: IDCC) after the company reported Q2 revenues that were slightly below estimates. The analyst believes that the focus should quickly shift to 1) the reduced operating cost structure as the company becomes increasingly efficient in both development and IP enforcement; as well as 2) the significant $200MM advance royalty payment from Huawei that flowed into deferred revenue.

More important than the results was confirmation of a $200MM advance payment by Huawei from the arbitration ruling. While IDCC has yet to recognize any Huawei revenues they continue to negotiate terms of a larger relationship/opportunity and management is optimistic this will begin in Q3. Deferred revenue are typically associated with revenues over the NTM period and Huawei could represent as much as $50MM in annual recurring royalties indicating a “past sales” component of as much as $150MM.

The price target increases to $73.00 (from $69.00) based on 8.5x 2017 EBITDA.

For an analyst ratings summary and ratings history on InterDigital Inc. click here. For more ratings news on InterDigital Inc. click here.

Shares of InterDigital Inc. closed at $59.58 yesterday.

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