Qualcomm rockets higher by another 10% — extending the gains from its settlement with Apple (QCOM)

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Qualcomm continued to soar Wednesday morning, up 10%, after announcing its settlement with Apple on Tuesday afternoon.
The stock booked a 23% gain on Tuesday.
The settlement includes Apple paying a fee to license the chipmaker’s technology for at least the next six years.
Watch Qualcomm Trade Live.

The chipmaker Qualcomm extended its gains Wednesday morning, up over 10%, as traders continued to bid up shares after the company reached a settlement with Apple over their long-running royalty dispute. Qualcomm’s stock spiked 23% in the wake of the news on Tuesday.

The two-mega tech companies headed to court for one day before announcing the settlement, which resolves all claims globally and has Apple paying a fee for the use of Qualcomm technology for at least the next six years.

The dispute was settled largely in-line with Qualcomm’s interpretation of patent rights. Specifically, Qualcomm asserted that all 5G smartphone makers are subject to licensing fees on the use of its technology even if they do not purchase chips directly from Qualcomm.

"Qualcomm and Apple announced a settlement agreement yesterday that appears to be overwhelmingly positive for Qualcomm despite the absence of details at this time," noted JPMorgan research analyst Samik Chatterjee. Chatterjee has an "overweight" rating and a price target of $88 for Qualcomm — more than 12% above current trading.

While not specifically announced, the agreement opens the door for Qualcomm to resume its previous role as a chip supplier to Apple. Following news of the settlement, Apple’s current chip supplier, Intel, announced it would exit the 5G market as the company saw no "path to profitability."

Apple had previously delayed its entry into the 5G market, in part due to the dispute with Qualcomm. As major rival Samsung moved forward with development of its own 5G product suite, Apple faced increasing pressure to settle.

According the Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, a data-analytics firm, Qualcomm shorts had lost more than $200 million dollars on Qualcomm through Tuesday after booking mark-to-market profits of $1.3 billion in 2018.

Including Wednesday’s premarket gain, Qualcomm was up 37% year to date.

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