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No matter what your business, it pays to be a patent holder. In the lucrative wireless telecommunications field, it is a very good thing indeed. There is a suburban Philadelphia outfit that ranks with the industry movers and shakers, by virtue of solid demand for its patented wireless technology designs.
InterDigital (NASDAQ: IDCC) develops and licenses circuitry designs, software and other advanced wireless technologies that drive voice and data communications. The firm is a leading contributor to global wireless standards. It holds a strong portfolio of patented technologies, which it licenses to manufacturers of 2G, 2.5G, 3G, and 802 products worldwide. Alcatel-Lucent (NYSE: ALU) and Qualcomm (NASDAQ: QCOM) are competitors.
InterDigital pleased investors last week, when it guided Q3 revenues to about $55.5-$56.5 million. That was up from previous guidance of $53.5-$54.5 million and topped the consensus Street view of $54.68 million. Management also announced that it had signed a seven-year licensing agreement to provide technology for Apple's (NASDAQ: AAPL) iPhone. Boenning & Scattergood subsequently reiterated its "market outperform" rating on the issue and boosted its price target to $37.
The stock popped on the licensing/guidance news and then passed into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy," three "buys" and one "hold." Analysts see a 21% average annual growth rate through the next five years. The IDCC Price to Cash Flow ratio (14.97), Price to Free Cash Flow ratio (12.99), Operating Margin (28.34%), Net Profit Margin (21.64%) and Return on Equity (24.93%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 56% of the outstanding shares. Over the past twelve months, the stock has traded between $19.55 and $36.91. A stop-loss of $19.95 looks good here. Note that the firm is expected to announce Q3 results in early November.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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