On April 16, 2019, Qualcomm (QCOM) and Apple (AAPL) agreed to settle their ongoing disputes. The outcome was significant for Qualcomm.
As Charles H. Dow, co-founder of the Wall Street Journal has said:
“The one sure thing in speculation is that values determine prices in the long run. Manipulation is effective temporarily, but the investor establishes price in the end. The object of all speculation is to foresee coming changes in values. Whoever knows that the value of a stock has run ahead of price and is likely to be sustained can buy that stock with confidence that as its value is recognized by investors, the price will rise (Dow, Charles H. Review and Outlook. Wall Street Journal. February 25, 1902.)."
For many years, the market price of QCOM appeared to be reflecting the neglect of speculators. In the meantime, investors slowly and selectively accumulated shares of QCOM in anticipation of the high risk proposition that QCOM would prevail against AAPL.
As seen in our chart below, QCOM has found its share price at the undervalued level several times since 2016. The September 13, 2018 announcement of the accelerated share buyback seems as though it was at an elevated prices. However, as our updated 10-Year price target indicates, the prospects for QCOM are far in excess of current levels.
In many respects, the price of Qualcomm has been at the mercy of Apple and their ongoing lawsuits. However, Charles H. Dow has the following to say of such conditions:
“The manipulator is all-powerful for a time. He can mark prices up or down. He can mislead investors inducing them to buy when he wishes to sell, and to sell, when he wishes to buy; but manipulation in a stock cannot be permanent, and, in the end, the investor learns the approximate truth. His decision to keep his stock or to sell it then makes a price independent of speculation and, in a large sense, indicative of true value (Dow, Charles H. Review and Outlook. Wall Street Journal. October 18, 1901.).”
We believe that Apple has played into the hands of value investors and we’re thankful for it. Now the test becomes whether Qualcomm will realize the overvalued targets that we have set for the stock, as seen here.