Market Overview

Qualcomm-NXP Deal Proving That The Internet Of Things Has Reached An Inflection Point

Share:
Qualcomm-NXP Deal Proving That The Internet Of Things Has Reached An Inflection Point
Related NXPI
KeyBanc Previews Q3 Semi Earnings, Downgrades Integrated Device Technology On Renesas Deal
BofA Upgrades NXP, Downgrades Microchip: A Semiconductor Pair Trade
Related QCOM
Surverying The Q3 Earnings Heat Map
Broadcom Says A Fraudulent DoD Memo Circulated Among Senators, Congress
73 Technology 'Safer' Dividend WallStars For October (Seeking Alpha)

QUALCOMM, Inc.'s (NASDAQ: QCOMproposed $110 per share offer to acquire NXP Semiconductors NV (NASDAQ: NXPI) serves as a sign that the Internet of Things has reached an inflection point, at least according to Craig Hettenbach of Morgan Stanley.

In a report on Friday, Hettenbach noted that the $47 billion proposed acquisition is the largest to date in the semiconductor industry and comes at a time when the Internet of Things segment is "moving from hype to reality."

Hettenbach turned positive on NXP Semiconductors' stock last October and re-instated coverage of the company with an Overweight rating and $115 price target. In his latest report, the analyst reaffirmed his positive view on NXP Semiconductors given the margin expansion potential through its acquisition of Freescale and its strong positioning in the auto market an IoT.

A Fortune report noted that the acquisition would give Qualcomm back some of the lost chip business it lost from Apple Inc.'s (NASDAQ: AAPL) iPhone 7 as NXP Semiconductors' sensor an payment chips are included in the iPhone 7.

However, the analyst downgraded NXP Semiconductor's stock to Equal-Weight as the stock's near-term performance will be mostly influenced by the Qualcomm deal. The price target was also raised to $110 from $109 to reflect the price tag on the pending merger.

Commenting on the proposed acquisition, Hettenbach stated the deal represents a 16.5x multiple to his prior 2017 MW EPS estimate of $6.68. On an EV to EBITDA and EV/S basis, the deal comes out to 14x and 4.6x 2017 sales.

Finally, the analyst stated that the initial feedback he received from investors is that the $110 takeout offer is "underwhelming" and it's possible another bidder could present themselves. Nevertheless, Qualcomm could be best positioned to leverage its balance sheet and acquire NXP Semiconductors given its $31 billion cash hoard and just $11.8 billion in debt.

Latest Ratings for NXPI

DateFirmActionFromTo
Oct 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Sep 2018Bank of AmericaUpgradesNeutralBuy
Sep 2018Stifel NicolausDowngradesHoldSell

View More Analyst Ratings for NXPI
View the Latest Analyst Ratings

Posted-In: Craig Hettenbach Internet of Things Morgan Stanley NXP Semiconductors Qualcomm Qualcomm NXP MergerAnalyst Color Analyst Ratings Best of Benzinga

 

Related Articles (AAPL + NXPI)

View Comments and Join the Discussion!
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

These 9 Stocks Had The Biggest Earnings Reactions

Expedia's Room Night Growth Wasn't As Bad As You might Think