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Why Is NXPI Trading below the Purchase Price Offered by Qualcomm?

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Feb. 8 2017, Updated 7:35 a.m. ET

NXPI stock rises only 16.3% in 2016

In this series, we saw that NXP Semiconductors (NXPI) is moving rapidly to move toward the center of the secure, smart, and connected world. The company’s strong product portfolio and 14.4% market share in the automotive semiconductor market puts it in a unique position to tap the future growth arising from the automotive and IoT (Internet of Things) markets.

However, its current growth is slow and the company is facing high expenses in the short term. This saw NXPI stock rise only 16.3% in 2016.

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NXPI stock

NXP Semiconductors (NXPI) stock is currently trading at an 11% discount to the $110.00 price Qualcomm (QCOM) agreed to buy per NXP share. Wall Street analysts have maintained a “hold” rating for NXPI, with a median price target of $110.

NXP Semiconductors stock is currently trading at $97.88, which is lower than the analysts’ bearish price target of $105.00. However, the stock has a bullish target of $120.00, which it could achieve if it receives a counter offer.

Qualcomm stock

On the other hand, Qualcomm (QCOM) has mixed ratings of “buy” and “hold”. After the lawsuits against Qualcomm, analysts reduced their median price target from $74.50 in December 2016 to $66.50 in January 2017. The stock is currently trading at a discount of 18.4% from the median price target.

Qualcomm stock has a bearish price target of $47.10, which it could reach if another lawsuit springs up against the company or if the company cancels the NXP Semiconductors acquisition. Qualcomm stock has a bullish price target of $81.00, which it could achieve if the NXP Semiconductors merger is successfully completed.

TXN and STM stock

Meanwhile, rivals STMicroelectronics (STM) and Texas Instruments (TXN) are doing well and have “hold” recommendations. STM stock rose 11.6% between January 25–27, 2017, surpassing its median price target of $12.19 to reach $13.59. The stock rose after reporting strong earnings.

Meanwhile, analysts increased TXN stock’s median price target from $74.00 in December 2016 to $84.00 in January 2017. The stock is currently trading at a discount of 7.1% from the median target.

NXP is gearing up to boost growth in fiscal 2017 with its new products while it prepares to merge with Qualcomm. The merger would bring strong returns to Qualcomm’s shareholders in the form of appreciation in the stock price.

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