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QCOM Stock Alert: What the Apple Supply Deal Means for Qualcomm

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  • Qualcomm (QCOM) stock is popping higher on a new chip supply agreement with Apple (AAPL).
  • Apple will use Qualcomm’s modem rather than use its own as projected.
  • QCOM stock is jumping about 4% on the positive surprise.
Source: nikkimeel / Shutterstock.com

Qualcomm (NASDAQ:QCOM) is jumping about 4% on Monday. The positive lift in QCOM stock stems from a new chip supply agreement with consumer tech giant Apple (NASDAQ:AAPL). Essentially, the inked contract indicates that Apple’s wireless modems aren’t quite up to snuff yet, leading to significant downwind implications.

According to a Yahoo Finance report, Qualcomm will provide its Snapdragon 5G Modem-RF Systems for Apple iPhone models launching from 2024 to 2026. A Qualcomm spokesperson noted that the financial terms of the deal are not presently being shared. In addition to QCOM stock rising, AAPL stock is also seeing a modest lift today.

Notably, Apple bought the modem chip business under Intel (NASDAQ:INTC) back in 2019. Earlier this year, Qualcomm CEO Cristiano Amon also said that he expected Apple to manufacture its own in-house modems for 2024. While that sentiment aligned with Apple’s prior statements and ambitions, the consumer tech giant appears to have since recognized the complex nature of smartphone modems, especially their intricate supply chain.

For QCOM stock, this news represents an unexpected positive surprise. The disclosure offers some comfort to other Apple suppliers as well, at least in the near term.

QCOM Stock Lights Up Options Screener as Differences Are Set Aside

Given the above, it isn’t shocking to see bullish sentiment spike in the derivatives market. In particular, QCOM stock represents one of the highlights in Barchart’s screener for unusual options volume. Compared to the trailing one-month average, volume during Monday’s early afternoon session shot up 82.7%.

At the time of this writing, total volume hit 111,540 contracts against an open interest reading of 683,561 contracts. Further, the put/call volume ratio for QCOM comes in at 0.62, with call volume reaching 68,895 contracts and put volume reaching 42,645.

Fintel’s screener for options flow — which filters for big block trades likely made by institutions — also shows significant volume spikes for bought call options, including calls featuring strike prices that land out the money (or above the open market price of QCOM stock). Possibly, this dynamic may indicate high-conviction optimism among institutional investors.

In many ways, the generally positive sentiment in the options arena is justified considering Qualcomm’s rough relations with Apple. As Yahoo Finance points out, the companies previously engaged in a “yearslong legal tussle” over licensing terms. That ended in 2019, when the two agreed to drop litigation.

Now, it seems bygones are bygones, with this being the “second consecutive agreement between Apple and Qualcomm” and “structured similarly to the previous deal.”

Why It Matters

According to TipRanks, Wall Street analysts peg QCOM stock as a consensus strong buy. This assessment breaks down as 14 buy ratings, four holds and zero sell ratings. Additionally, the average price target for shares stands at $137.79, implying about 25% upside potential.

On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2023/09/qcom-stock-alert-what-the-apple-supply-deal-means-for-qualcomm/.

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