Analyst: Why Apple's Potential Purchase Of Intel's Modem Businesses Could Be Positive For Sequans

Reports of Apple Inc. AAPL looking to acquire Intel Corporation's INTC smartphone modem business are "plausible" and would bode well for Sequans Communications SA SQNS, according to Roth Capital.

The Analyst

Roth's Scott Searle maintains a Buy rating on Sequans with a 12-month $2.50 price target.

The Thesis

If Apple acquires Intel's assets, Searle said it would imply Sequans, a provider of single-mode LTE wireless semiconductor solutions, is among the shrinking population of non-Chinese and non-vertically integrated 4G and 5G silicon suppliers. Apple's tie-up with Intel's asset could create a scenario where all non-Apple and Intel baseband customers will be "fair game" for merchant suppliers like Sequans to target.

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Searle said Sequans is backed by a $9.8 million 5G investment from a strategic partner and is likely to add new strategic relationships in the near term. This implies the company's core value is "not recognized" by the Street.

Shares of Sequans are trading at less than two times EV/2020 sales, which is a discount to its small-cap semi peers at around three times. However, Searle said this isn't justified given expectations for sales growth of at least 40% and at 3.5 times EV/2020 sales the stock would be valued at around $2.50.

Price Action

Thinly-traded Sequans sat around 92 cents per share Turesday afternoon.