QUALCOMM, Inc.: Will This Trigger a Crash in Qualcomm Stock (QCOM)?

Qualcomm stockQualcomm Stock (QCOM) Forecast 2017

Shares of QUALCOMM, Inc. (NASDAQ:QCOM) have been on a rollercoaster ever since the Federal Trade Commission filed an antitrust lawsuit against the company. We’ve seen Qualcomm stock (QCOM) drop nearly five percent in one trading session, which has many investors wondering if it’s time to bail on the microchip maker.

Many analysts were in shock when QCOM stock moved from $66.64 to $63.45 on Tuesday. They acted as if the FTC lawsuit fell out of the sky with no warning, but the writing was clearly visible on the wall. We wrote a report several weeks ago that put our readers on alert.

At the time, South Korea had fined Qualcomm $854.0 million for similar antitrust breaches. They weren’t even the first country to do so. China had slapped Qualcomm with a $975.0 million fine earlier in the year, suggesting to me that this was no one-time event.

If China and South Korea—two countries with weak records on antitrust enforcement—can charge Qualcomm, then U.S. officials won’t be far behind. (Source: “U.S. Antitrust Agency Sues Qualcomm Over Patent Licensing,” Fortune, January 17, 2017.)

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It turns out I was right. The FTC believes that Qualcomm abused its market power in dealing with smartphone makers, which is exactly the same charge brought forward by China and South Korea. However, U.S. authorities have just asked the chipmaker to cease and desist.

They didn’t impose a crushing fine, and to be fair, that’s a much better outcome than I predicted.

My worry was that continued legal fees would eat into Qualcomm’s cash flow as it was in the middle of buying out NXP Semiconductors NV (NASDAQ:NXPI). Considering that it is among the biggest tech acquisitions of all time, investors might not take kindly to unexpected hits to their cash flow.

American officials proved more circumspect than expected. After the initial shock wore off, the market bounced Qualcomm stock back to $65.00 because they realized that they got off easy.

However, let’s not forget the European Union. I’m sure there are a bunch of effete, tightly-wound regulators planning to whack Qualcomm stock in the near future. The troglodytes at the EU are anemic to progress, reluctant to change, and preternaturally opposed to the tech community.

They won’t be content to leave the “progress policing” to others—they must be the ones to teach Silicon Valley a lesson. This why they targeted Alphabet Inc (NASDAQ:GOOG) for antitrust crimes, Apple Inc. (NASDAQ:AAPL) for tax evasion, and Facebook Inc (NASDAQ:FB) for…

…well, just for good measure I suppose.

Based on Europe’s record of being anti-tech, we expect antitrust authorities to levy an enormous fine on Qualcomm. At some point these fines could knock a few dollars off Qualcomm stock, but it would be a temporary setback. Our long-term view of QCOM stock remains unchanged.

We still expect Qualcomm stock to break its upper bound in 2017. Keep an eye on this investment because it could keep hitting record highs once the initial shock of an EU fine wears off.