InterDigital Raises Q4 Revenue Guidance On Licensee Addition

InterDigital, Inc. (NASDAQ:IDCC) recently raised revenue guidance for fourth-quarter 2019 to better reflect incremental revenues from a new licensee. After missing top-line estimates in the third quarter, the higher revenue expectations for the to-be-reported quarter reflect operating leverage of the company’s business model.

Management currently expects fourth-quarter revenues to lie within $92 million to $100 million, up from prior expectations of $83-$95 million. The improved outlook includes recurring revenues in the range of $74 million to $77 million compared with previous expectations of $74 million to $78 million.

InterDigital expects operating expenses to increase $11-$14 million on a sequential basis. The revised guidance is primarily attributable to a new consumer electronics licensee, which the company signed in the second half of December.

Notably, InterDigital’s commitment toward licensing its broad portfolio of technologies to wireless terminal equipment makers, which allows it to expand its core market capability, is laudable. The company has leading companies such as Huawei, Samsung (KS:005930), LG and Apple (NASDAQ:AAPL) under its licensing agreement. Consequently, it expects to generate healthy revenues from patent licensing in the forthcoming quarters as well.

InterDigital’s global footprint, diversified product portfolio and ability to penetrate in 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 considerable value, considering the massive size of the market it licenses. Furthermore, the company remains committed to pursuing strategic acquisitions in order to drive its product portfolio and boost organic growth.

However, the stock has lost 19.8% over the past year, while the industry has rallied 19.7%. Bottom-line estimates for 2019 have decreased 59.4% in the trailing 12-month period, and is currently pegged at 43 cents, portraying inherent challenges for the company. Earnings estimates for 2020 have also fallen 28.5% over the past year to $1.28.

InterDigital currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are KT Corporation (NYSE:KT) and Ubiquiti Inc. (NASDAQ:UI) , sporting a Zacks Rank #1 (Strong Buy) and PCTEL Inc. (NASDAQ:PCTI) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

KT Corporation has a long-term earnings growth expectation of 11.5%.

Ubiquiti has a long-term earnings growth expectation of 9.4%. It delivered an average positive earnings surprise of 16.1% in the trailing four quarters, beating estimates thrice.

PCTEL delivered an average positive earnings surprise of 150.6% in the trailing four quarters, beating estimates on each occasion.

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