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InterDigital (IDCC) Soars 101% YTD: Will the Uptrend Continue?

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Shares of InterDigital, Inc. (IDCC - Free Report) have surged 101.1% year to date, backed by solid top-line growth and continued momentum in the licensing business. Earnings estimates for the current and next fiscal have increased a stellar 190.2% and 82.3%, respectively, over the past year, implying robust inherent growth potential. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears primed for further appreciation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
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Growth Drivers

Headquartered in Wilmington, DE, InterDigital is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks.

A well-established global footprint, diversified product portfolio and ability to penetrate different markets are key growth drivers for the company. Apart from a 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, given the massive size of the market it offers licensing technologies to.

InterDigital reported solid third-quarter 2023 results, with the bottom line and top line surpassing the respective Zacks Consensus Estimate. The company generated higher revenues year over year, owing to healthy catch-up revenues and improvement in smartphone net sales.

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. The company is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets.

The company 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.

With a VGM Score of B, the stock has a long-term earnings growth expectation of 17.4%. It delivered a stellar earnings surprise of 170.7%, on average, in the trailing four quarters.

Other Key Picks

Comtech Telecommunications Corp. (CMTL - Free Report) , carrying a Zacks Rank #2, is another solid pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.    

Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data.

Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 20.4% and delivered an earnings surprise of 12%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

United States Cellular Corporation (USM - Free Report) , sporting a Zacks Rank #1, is the fourth largest full-service wireless carrier in the United States. The company provides a range of wireless products and services, and a high-quality network to increase the competitiveness of local businesses and improve the efficiency of government operations.

U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology. The company is well-positioned for continued demand for broadband.

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