The market responded positively July 26 to Qualcomm Inc.'s $30 billion stock repurchase plan, announced the day prior in tandem with the news that the wireless company wouldn't be extending its acquisition agreement with NXP Semiconductors NV.
The company also reported better-than-expected earnings that day.
The tech merger, planned for 21 months, was held up by Chinese regulators, which withheld the approval that would have moved the deal forward through Qualcomm's self-imposed deadline.
Company stock, which closed at $58.55 on July 25, was priced at $63.58 per share as of market close July 26, up about 8 percent - and the highest it had been since early March, when the company looked like it would soon be acquired by Broadcom Ltd. That deal, a hostile takeover bid, was later scuttled.
As recently as April, Qualcomm stock dipped below $50 per share.
Jerry Braakman, chief investment officer of Santa Ana-based First American Trust, which holds shares in Qualcomm, said the firm would have preferred the NXP deal go through.
However, going forward, without it pending Qualcomm will be able to better focus on its core business, he said.
"It's still a very attractive valuation for a company that has some very unique leading technology at pretty low multiples compared to some other technology companies trading out there, and I think between the share buybacks and being able to focus on its core business is why it's up today," he said. "In that regard I think it allows them to built a new path, reward shareholders for sticking around and with the valuation already that low, any share buyback is going to be reflected in the share price pretty rapidly."
With that situation resolved, Braakman said the remaining overhang on the stock is Qualcomm's legal battle with Apple over licensing fees.
"It think everybody would probably prefer if they found a way to settle their differences," he said.
For the third quarter of its fiscal year 2018, which ended June 24, Qualcomm reported net income of $1.5 billion of revenue of $5.6 billion, compared to net income of $1.2 billion on revenue of $5.3 billion one year prior.
An average of ratings from 24 analysts estimated earnings at 71 cents per share. The company’s guidance had been for 65 cents to 75 cents per share. Earnings were $1.01 per share, and revenue from its licensing division totaled $1.47 billion, significantly above Qualcomm’s estimate of $850 million to $1.05 billion.
Reach reporter Sarah de Crescenzo at firstname.lastname@example.org.