Following the announcement of a deal with Samsung, Roth MKM analyst Scott W. Searle remains bullish on Interdigital (Interdigital Stock Quote, Chart, News, Analysts, Financials NASDAQ:IDCC).
On January 16, IDCC announced a new patent license agreement with Samsung around patents relating to digital TVs and computer display monitors. The company subsequently released preliminary Q4 results.
“Samsung is a recognized market leader in consumer electronics and the largest TV manufacturer in the world,” said IDCC’s Chief Licensing Officer Eeva Hakoranta. “I am pleased to say that this agreement is another example of a deal achieved as a result of negotiation and is another important step in our licensing of the consumer electronics industry underlining the value of our technology for this market.”
The analyst said he views this development as a positive.
“Yesterday, Interdigital announced it had signed a video license agreement with Samsung for digital TVs and computer display monitors (not to be confused with ongoing arbitration for cellular technologies, which remains on track for mid-2024 resolution),” Searle wrote. “We believe this translates to ~$0.25+ annual EPS contribution (roughly 36M global TVs (~18% market share) plus monitors). Additionally, we believe it underscores the continued momentum within the HEVC portfolio for CE devices, which we believe is tracking from the annualized 3Q23 run rate of $60M to its $150M target over the next 3+ years.”
In a research update to clients January 17, Searle maintained his “Buy” rating and price target of $119.00 on IDCC stock.
The analyst thinks IDCC will post EPS of $5.51 on revenue of $431.3-million in fiscal 2024. He expects those numbers will improve to EPS of $6.25 on a topline of $460.8-million the following year.
“With an attractive long-term model, strong balance sheet (~$18+ net cash/share), and defensible IP position, IDCC currently trades at ~15x 2024E pro forma EPS (net of cash). Our $119 price target is based on 18x P/E CY24 pro forma EPS, plus $20 net cash/share,” he concluded. “Impediments to achieving our price target include growth of the smartphone and IoT category, the ability and timing of adding incremental licensees and the development of new market opportunities, including M&A.”
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