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InterDigital (IDCC) Solid Q3 View to Boost Investor Confidence

InterDigital, Inc. IDCC recently issued guidance for third-quarter 2021. The outlook offers clarity regarding its business operations as it aims to navigate through the post-pandemic revival and is likely to instill investors’ confidence in the stock.

Management currently expects third-quarter revenues between $119 million and $121 million, reflecting the operating leverage of the company’s business model. This includes recurring revenues of $89-$91 million, indicating a sequential increase of $15 million driven by a fixed price license agreement signed during the quarter. The Zacks Consensus Estimate for revenues is pegged at $119 million. Total operating expenses are likely to be between $97 million and $105 million.

InterDigital had earlier reported modest second-quarter 2021 results with the bottom line beating the Zacks Consensus Estimate despite top-line contraction. The quarterly results were largely in accordance with the company’s overall expectations. The company reported net income of $1.6 million or 5 cents per share compared with $22.3 million or 72 cents per share in the prior-year quarter. The decline was largely due to lower revenues and higher operating expenses. Adjusted earnings in the reported quarter were 39 cents per share, which topped the Zacks Consensus Estimate of a loss of 25 cents, delivering a surprise of 256%. The wireless R&D company’s revenues decreased to $87.7 million from $104.5 million in the prior-year quarter owing to a challenging macroeconomic environment. The top line was at the high end of the company’s guidance and surpassed the consensus estimate of $86 million.

InterDigital’s commitment to licensing its broad portfolio of technologies to wireless terminal equipment makers, which allows it to expand its core market capability, is laudable. It has leading companies, such as Huawei, Samsung, LG, and Apple, under its licensing agreements. Consequently, the company expects to generate healthy revenues from patent licensing in the forthcoming quarters as well.

InterDigital’s global footprint, diversified product portfolio, and its ability to penetrate different markets are impressive. Apart from the company’s strong portfolio of wireless technology solutions, the addition of technologies related to sensors, user interface, and video to its offerings is likely to drive significant value, considering the massive size of the market it licenses. Furthermore, the company remains committed to pursuing acquisitions in order to drive its product portfolio and boost organic growth.

The company is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. InterDigital aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT, and allied technology areas by leveraging its research and development capabilities, technological know-how, and rich industry experience. At the same time, it intends to enhance its licensing revenue base by adding licensees and expanding into adjacent technology areas that align with its intellectual property position.

The stock has gained 18.2% over the past year compared with the industry’s growth of 26.5%.
 


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InterDigital currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the industry are Clearfield, Inc. CLFD, sporting a Zacks Rank #1 (Strong Buy), and Nokia Corporation NOK and Qualcomm Incorporated QCOM, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.

Nokia has a long-term earnings growth expectation of 1.5%. It delivered an earnings surprise of 202.7%, on average, in the trailing four quarters.

Qualcomm has a long-term earnings growth expectation of 21%. It delivered an earnings surprise of 13.5%, on average, in the trailing four quarters.


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