If you missed Qualcomm's (QCOM) rapid run on Tuesday and Wednesday morning, fret not. There could be an attractive entry point still to come.
Shares of Qualcomm have enjoyed the hottest two-day run in company history since it announced a settlement key customer Apple (AAPL) on Tuesday afternoon. The surge has left many investors crestfallen that they missed out on such a gargantuan gain.
Analysts have suggested that the price could continue to climb, with many setting price targets into the triple-digits. However, for those timing the markets, Qualcomm's earnings release on May 1 may be a better opportunity.
"For what it is worth, our DCF math suggests a $100+ fair value is possible, but likely requires the core licensing business to hold up (open for debate at the moment) and sustained strength in the chipset trajectory," Bernstein analyst Stacy Rasgon said. "We suspect the shares will continue to trade up somewhat into earnings...what happens afterwards likely depends on what management says, and how they say it."
The earnings could be an interesting starting point for a position among investors bullish on the 5G and smartphone opportunity at Qualcomm based on what is not known, rather than what is known.
If you're a shareholder in either Qualcomm or Apple...would you want to know how much the lawsuit settlement was for?$QCOM & $AAPL won't disclose...but #TuneIn to @cnbc @SquawkStreet now to hear what Mollenkopf WILL say about the deal... https://t.co/z2sox1R4Ze— Dominic Chu (@TheDomino) April 17, 2019
Despite the settlement, details surrounding the deal remain sparse.
In an interview with Action Alerts PLUS portfolio manager Jim Cramer on CNBC, Qualcomm CEO Steve Mollenkopf declined to disclose the payments Apple will make on missed royalty payments.
While a presentation reveals the companies have agreed to a multi-year chip agreement and stipulates that all worldwide litigation will be dismissed and withdrawn, the full terms of the agreement remain a mystery.
Additionally, the company's plans for its buyback program and dividend remain in the dark. The only figure cited is an incremental $2 in earnings per share expected as product shipments ramp.
In an information-starved market, a lack of elaboration from management on earnings could lead to a pullback and offer a more attractive entry.
Apple likewise omitted any specific terms that could paint a clearer picture, aside from its departure from Intel's (INTC) 5G partnership as that company exits the smartphone space. Questions will remain open for the smartphone king on its own earnings scheduled for April 30.
For Qualcomm, earnings could also bring the company's other legal issues to the forefront, which include an outstanding case against Huawei as well as an FTC decision on the royalty business model still forthcoming.
While many analysts are suggesting these cases are a foregone conclusion after the Apple settlement, the recognition of remaining overhang on earnings could ease the accelerator off the stock.
"We are leaving our QCOM and INTC estimates, ratings, and target prices unchanged at the moment as considerable uncertainty remains as to what the models look like," Bernstein's Rasgon said. "We will get useful information on the earnings calls in a week or two, and the stocks have already materially run."
Shares remain up double-digits on Wednesday to the highest share price in five years, charting well above the already raised estimates set by many analysts, likely leaving much less opportunity for investors late to the party on Wednesday.
Patience will be a virtue at this point.