The market has not yet fully adjusted the price of Qualcomm stock after its settlement with Apple last week, Morgan Stanley analysts wrote in a note on Tuesday.

That means that Qualcomm stock could go as much as much as 15% higher, to a target price of $95, analyst James Faucette and his team wrote.

Qualcomm is already on a tear. The stock rose about 20% the day it announced its settlement with Apple, and continued to climb after that.

Qualcomm holds critical intellectual property related to cellular networks, and equipment makers like Apple pay it royalty fees to use those so-called “standards” patents. In 2017, Apple sued Qualcomm, claiming that those licensing practices were unfair and anticompetitive.

Some analysts believe Qualcomm won the dispute. Apple ended up paying Qualcomm a one-time payment that has been estimated to be in the billions of dollars, and bought a license to those patents and modem chips directly from Qualcomm at a price estimated to be $8 or $9 per phone.

“The Apple agreement structure is very consistent with what we thought it should be (Apple paying a meaningful per phone royalty and returning to use Qualcomm modems),” the Morgan Stanley analysts wrote. “However, we were very surprised that Apple chose to settle now and return to what we estimate had been roughly the status quo; instead we had expected that Apple would wait to see if the courts would hand it more negotiating leverage.”

One big reason for the Qualcomm bull case is that Morgan Stanley analysts said that Qualcomm is the “key enabler” of next-generation 5G networks. Qualcomm’s chokehold on 5G modems is one reason Apple settled — otherwise, it might have been late to release a 5G iPhone, which is expected in 2020.

The analysts added: “We think Qualcomm’s new horizons in 5G opportunities are relatively cheap/free options post Apple-settlement, Qualcomm enjoys a range of underappreciated options outside handsets that have the potential in the long run to make Qualcomm perhaps the largest semiconductor company in the world.”



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