Analysts are confident in Qualcomm, Inc.'s (QCOM) growth potential, as it pacifies disputes with Huawei and Apple and its big bets on 5G are paying off.
Qualcomm shares are rising 3.3% as of 9:24 a.m. in New York as the announcement of an accelerated buyback program stokes positive market sentiment.
Analysts, while acknowledging the importance of this initiative, are most bullish on the chip-makers ability to cash in on the growing 5G market alongside tenuous partners like Huawei Technologies Co. Limited and Apple, Inc (AAPL) .
This morning, Barclays analyst Blayne Curtis slated a price target of $95 after reinstating his coverage, citing a 5G ramp-up as "the reason to own the stock."
His analysis builds on a feeling that other analysts, such as Cannacord Genuity analyst T. Michael Walkley, who pointed to the importance of 5G as a major driver following his firm's growth conference in August.
"We believe initial 5G sales will also help QCT trends exiting fiscal year 2019 and position Qualcomm for stronger growth in fiscal 2020 with the ramp of 5G smartphone sales," he forecasted. "Also, with Qualcomm heavily investing in 5G R&D the past several years, we anticipate Qualcomm will harvest these investments with expanding margins."
He explained that this investment positions the company positively and places it ahead of competitors.
"We believe Qualcomm is roughly one to two years ahead of its competitors in 5G development and anticipate Qualcomm will capture meaningful smartphone market share as the market transitions to 5G," he said.
To be sure, Qualcomm faces some resistance to capitalizing on the growth in 5G due to its ongoing disputes with both Huawei and Apple.
The chip-maker has been engaged in long and drawn out court battles with each phone manufacturer over royalties and patent infringement. The battles have led to a number of suits and lawsuits that have dragged in an army of litigators and regulators to step in across the globe.
Most notably, the dispute precipitated Apple's announcement that it would use exclusively Intel Corporation's (INTC) modems for its upcoming phone releases.
Yet, analysts are beginning to see a resolution ahead.
"It's not clear exactly when the Apple and Huawei disputes will end, but it's a distinct positive that Huawei is already making catch-up payments," Barclay's Blayne Curtis wrote this morning. "Apple may be farther apart, but we see Qualcomm as more flexible given its latest licensing scheme and eventual need for 5G."
He added that fatigue over the dispute and its associated litigation cost are a motivating factor for an amicable resolution between the parties.
Further, if Qualcomm is indeed two years ahead of its competition in 5G as analysts suggest, Apple may have no choice but to shift away from Intel and choose the best chips for its pricey new iPhones smartwatches, unveiled yesterday.
If an armistice is indeed reached, it would further the bullish case for Qualcomm as it positions itself to capitalize on secular shifts in technology.