InterDigital Inc (IDCC)

[Paullee]

Still more upside to InterDigital, says Roth

The stock has been on an incredible run this year, but Roth Capital Partners analyst Scott W. Searle sees more upside to wireless patents company InterDigital (InterDigital Stock Quote, Charts, News, Analysts, Financials NASDAQ:IDCC). Searle delivered an update on Thursday, saying the company has a clear path to earnings growth over the next few years, with lots of potential in the video streaming sector.
Last week, Roth Capital hosted a call with Interdigital President and CEO Liren Chen to talk about progress in the business, where the company had a successful UK High Court outcome with Lenovo, while its Samsung arbitration continues in line with prior disclosed timelines and parameters and its CE video IP monetization continues to build momentum.
“With multiple technologies feeding this opportunity (largely video codecs/compression IP buffeted by WiFi and core cellular solutions), we expect CE momentum to continue into key segments such as TVs/monitors, laptops, etc., comprising over a 400 million annual unit opportunity,” Searle wrote.
On IDCC’s IP video, Searle called it a key enabler but one which has yet to be monetized in the currently $300-$400 billion market (and en route to $500 billion by 2026). Searle said the sector uses standards-based compression solutions that improve performance and reduce transmission and storage costs, effectively essential tech.
Searle said the opportunity is huge for InterDigital. Providing perspective, the analyst said that a $0.01 per month fee, for example, across the top ten global streaming platforms would translate to an annual $100 million+ or about $3.00 per share in earnings.
“While early, we believe this opportunity has been actively developing over a multi-year period and expect this model to emerge within the next couple of years (Note: this is not built into our current expectations),” he said.
IDCC shares are up about 90 per cent year-to-date, but Searle has maintained a “Buy” rating on the stock and $114 per share target, which at press time translated to a projected one-year return of 19.6 per cent.
Searle is forecasting InterDigital’s revenue going from $457.8 million in 2022 to $513.2 million in 2023 and to $434.2 million in 2024, while EPS is expected to go from $4.45 per share in 2022 to $8.08 in 2023 and to $5.65 in 2024.
“With additional upside of $2-3 EPS in the core wireless business (Samsung arbitration, OPPO & Vivo licenses), video CE opportunities ($1+ EPS) and emerging recurring video streaming monetization ($3+ EPS), we remain comfortable with a $7.00+ EPS target over the next two to three years,” Searle wrote.
https://www.cantechletter.com/2023/07/still-more-upside-to-interdigital-says-roth/#

older article
InterDigital is a double from here, Roth Capital says

Good news has been coming in from InterDigital Inc (InterDigital Inc Stock Quote, Charts, News, Analysts, Financials NASDAQ:IDCC), according to Roth Capital Partners analyst Scott W. Searle, who delivered an update to clients on the company on Tuesday. Searle maintained a “Buy” rating on the stock and $100.00 target price, which at the time of publication represented a projected one-year return of 102 per cent.
A leading designer, developer and licensor of advanced technologies for mobile devices and networks, InterDigital has a portfolio of over 19,000 patents, with an emphasis on communications and patents for 3G, 4G, Wifi and emerging 5G applications along with IoT, video and sensor solutions.
The company announced on Tuesday that its board has authorized an increase to its stock repurchase program by $333 million to a total of $400 million, with the company saying it will use its cash resources to facilitate the buybacks.
Also on Tuesday, InterDigital announced an agreement with Samsung to have a panel of arbitrators to “establish the royalties to be paid by Samsung,” with the outcome to be a global licensing agreement expected to be concluded within about 18 months.
“While we always prefer to conclude our license agreements through amicable good faith negotiation, independent binding arbitration provides an effective mechanism for resolving licensing disputes,” commented Liren Chen, CEO and President, InterDigital, in a press release. “I welcome Samsung’s willingness to enter into a new license with us and their commitment to work through the remaining issues in arbitration.”
Finally, on Tuesday InterDigital further announced a new video licensing agreement with LG and a renewal of one with Panasonic.
Searle called the Samsung arbitration news a mixed bag with more positive than negative, since Samsung is acknowledging that it uses IDCC patents and expects to be required to use their IP going forward and, further, Searle said arbitration will be less costly and more amicable route.
“Overall, we view the news as a net positive with Samsung’s arbitration acknowledging IDCC’s patent validity (and avoiding a license agreement lapse), just debating the actual annual value (Note: We highlight that Samsung pays ~60 per cent of the recent Apple renewal). While near-term revenue recognition questions exist, we believe the longer-term sales and EPS will be higher,” Searle wrote.
On the share buyback plan, Searle pointed out that the $400 million amounts to about 26 per cent of IDCC’s market cap at the start of the new year.
“While we believe this encompasses an element of stock support, given potential investor discomfort around the arbitration timeline and outcome, it also underscores the successful conclusion of the Apple renegotiation and partial resolution with Samsung (arbitration). Consequently, capital requirements for a protracted and expensive litigation have been mitigated, leaving the prior balance sheet with $863 million in cash (FCF positive operations) in an overcapitalized state. Overall, the buyback is healthy, accretive and provides support,” he said.