On Jul 30, we issued an updated research report on InterDigital, Inc. IDCC.
In the past six months, this Zacks Rank #3 (Hold) stock has yielded a return of 5.3% compared with the industry’s gain of 1.2%.
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Existing Scenario
InterDigital’s commitment toward licensing its broad portfolio of technologies to wireless terminal equipment makers, which allows it to expand its core market capability, is noteworthy. Currently, it has leading companies such as Huawei, Samsung, LG and Apple under its licensing agreement. Also, InterDigital expects to grow its licensing revenue base by adding a number of other companies, which have attained market prominence over the past several years, to its licensees.
Moreover, the company’s global footprint, diversified product portfolio and the ability to penetrate in different markets are commendable. Apart from a strong portfolio of wireless technology solutions, the addition of technologies related to sensors, user interface and video to its offerings is likely to drive considerable value, considering the massive size of the market it licenses.
Further, the company plans to acquire the patent licensing business of Technicolor — a pioneer in the video space. This buyout is expected to provide InterDigital with an enhanced portfolio of video technologies besides opening up new opportunities in the consumer electronics market.
However, given the company’s international presence, its business is exposed to macroeconomic risks. Moreover, its high investment in R&D projects might affect its profitability in the coming quarters.
This apart, ongoing tensions between the United States and China due to trade restrictions imposed on the sale of communication equipment and technology solutions to Chinese firms are likely to hurt the industry's credibility and lead to losses. The failure of both the countries to resolve their trade differences might hinder the company’s growth prospects.
Key Picks
Some top-ranked stocks from the same space are Comtech Telecommunications Corp. CMTL, Motorola Solutions, Inc. MSI and Analog Devices, Inc. ADI. While Comtech Telecommunications sports a Zacks Rank #1 (Strong Buy), Motorola Solutions and Analog Devices carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Comtech Telecommunications surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 123.70%.
Motorola Solutions exceeded the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive earnings surprise of 12.09%.
Analog Devices outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 7.83%.
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