NXP Semiconductors (NXPI) was supposed to be purchased by Qualcomm (QCOM) for a stock share price of $127.50. It was announced yesterday that if China does not authorize the merger then Qualcomm would walk on the deal and give NXPI a $2 billion break up fee and cancel the merger. Today, China has not said anything and Qualcomm is walking.
NXP Semiconductor will soon have an extra $2 billion in its bank account. The current rumor is that the extra money will be used for a big $5 billion buyback or even a special dividend. Either way, it is great for shareholders especially since the stock has plummetted from over $120 to now an undervalued price at $91.
There is certainly plenty of volatility and even a chance that the stock price will go further down. However, for the long-term investor, this is a great value. Yahoo analysts give an average EPS for next year at 7.72. This is a PE of 11.78 at the current price. This price is indeed a bargain.
There is plenty of growth moving forward for this company. In June, NXP Semiconductors introduced semiconductors for use in high powered RF products for 5g networks. The company also is creating a new line of chips that make it easier for companies building AI tools. If you just look at the present-day, their embedded chips are already used in factories and automobiles.
With a strong base of current customers using their technologies and a nice set of future chips that will grow the company in the future, there is plenty to get excited about with NXP Semiconductors. I see this stock as a purchase below $92. I also believe it will make a nice sell at any price at $120 which should happen in 2-3 years.
Disclosure: I am long NXPI and I purchased today.