QUALCOMM, Inc (NASDAQ: QCOM) has been on fire since the company reached a deal with Apple, Inc. (NASDAQ: AAPL) earlier this month. However, one analyst said additional upside for Qualcomm shares may be limited, at least until investors know the details of the Apple agreement.

The Analyst

Bank of America analyst Tal Liani reiterated his Neutral rating on Qualcomm and raised the price objective from $71 to $90.

The Thesis

There are plenty of things for Qualcomm investors to love about the Apple deal, Liani said. There are things he doesn’t like about Qualcomm as an investment.

“In our view, the settlement gives Qualcomm’s royalty business a great boost in visibility and stability, which should translate to a higher valuation multiple, given this segment accounted for 54% of FY18 EBIT,” Liani wrote in a note.

The deal with Apple and the simultaneous withdrawal of Intel Corporation (NASDAQ: INTC) from the 5G modem business are also a testament to the quality of Qualcomm’s technology and provide an avenue for future growth, he said.

At the same time, the deal with Apple lacks specifics, and Qualcomm’s guidance for a $2 EPS boost from the deal must simply be taken on faith at this point. Unfortunately, with the stock up about 50 percent since April 16 and Qualcomm management’s history of overestimating earnings, there is too much risk in the stock to recommend at its current price, Liani said.

Price Action

Qualcomm's stock was down marginally Tuesday around $87.17 per share and remain up 52 percent year-to-date.

Related Links:

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