What happened?

Qualcomm Inc. won a 2-year legal dispute with Apple Inc. According to the settlement, Apple will pay a fee for the use of the chip maker’s technology for at least 6 years. In addition, Qualcomm will supply chipsets for Apple to use in its devices during the next several years. The overall advance of Qualcomm stock on Tuesday and Wednesday was about 40%.

Why is it important?

In general

The agreement will make it possible for Qualcomm to resume chip supplies to Apple. The iPhone producer is currently getting chips from Intel. However, the latter plans to exit the 5G market as it doesn’t see profit opportunities there. The resolution of the Qualcomm issue is positive for Apple as well, as the company will now be able to advance at the 5G market and provide competition for the rivaling Samsung.

For investors

It seems like a period of uncertainty for the stock is now over. Qualcomm expects the deal to boost its incremental earnings by $2 per share in 2020. More market players will now consider the stock for the long-term investment. All in all, Qualcomm may now make a boast of a strong patent portfolio and become a leader in 5G chipsets.    

The next big day for Qualcomm will come on May 1 when the company is going to report earnings. The company will then likely provide more details on its agreement with Apple.

Analysts have upgraded their price forecasts for Qualcomm stock naming different target levels from $60 to $90.

For traders

The great surge naturally leaves the stock overbought. The line connecting 2017 and 2018 highs just below $82 provides resistance for the price. Support lies at the previous high around $76.50 and at $72.

The weekly chart of Qualcomm Inc.
Qualcomm Inc., weekly chart