With QUALCOMM, Inc. (NASDAQ:QCOM)'s deal to buy NXP Semiconductors NV (NASDAQ:NXPI) falling through and the former announcing a $30-billion buyback program, Cowen is revisiting its thesis.

The Analyst

Analyst Matthew Ramsay upgraded Qualcomm from Market Perform to Outperform and increased the price target from $64 to $80.

The Thesis

Despite its wireless concentration, Qualcomm shares present compelling risk-reward on the basis of lower spending, solid non-Apple Inc. (NASDAQ:AAPL) QCT performance, and the accretive potential of QTL resolutions, Ramsay said in a Monday note.

Cowen's model has been updated to remove the NXP deal as well as Apple modem chipset revenue following Qualcomm's exclusion from 2018 iPhones and to add a higher probability for a a successful buyback.

Ramsay adjusted 2019 EPS estimates higher to account for the "$1-billion [in] planned spending reductions, unwinding of elevated legal expenses and potential Apple and Huawei royalty dispute resolutions for the lower forward share count."

Cowen's 2019 EPS estimate was hiked 20 percent from $4.95 to $5.93.

Qualcomm can achieve a 2020 EPS runrate of about $8, fully annualizing the fiscal 2019 catalysts, and even in the case of a bearish scenario, a 50-percent royalty discount settlement at Apple, Ramsay said. 

Qualcomm's upcoming catalysts include the following, the analyst said: 

• Settlement with Apple or Huawei.
• Execution of a buyback. 
• Traction with adjacent products into non-mobile verticals.
• Potential infusion of new ideas into management.

"At current valuation levels, we believe the risk-reward setup is attractive, as we believe investors are not currently valuing significant traction in any of these potential catalysts," Ramsay said. 

The Price Action

Qualcomm shares are up a little over 4 percent year-to-date.

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Photo courtesy of Qualcomm.