IDCC: Recurring Licensing Wins Will Drive Smartphone And Streaming Upside

Analysts have nudged their price targets for InterDigital higher, with recent increases of $20 and $25 helping support an updated valuation around $412 per share. They point to stronger recurring revenue, new smartphone licensing wins, and growing confidence in the large streaming opportunity as key drivers.

Analyst Commentary

Bullish analysts highlight that recent price target increases reflect growing conviction in InterDigital's ability to execute across its core licensing verticals, particularly as new smartphone agreements and streaming initiatives begin to scale. The uplift in recurring revenue forecasts and extended visibility into annual recurring revenue are seen as key supports for a higher valuation multiple.

Following the latest quarter, bullish analysts point to a solid beat and an in line outlook for annual recurring revenue as evidence that the company is steadily putting together the pieces needed to capture the large streaming opportunity, while also deepening its footprint in smartphones and consumer electronics.

Bullish Takeaways

• Recent price target hikes, including moves toward the mid to high $400s per share, are described as being driven by confidence that InterDigital can sustain double digit growth in recurring revenue and expand its valuation multiple.
• New multiyear smartphone licensing agreements with large Chinese vendors are described as increasing annual recurring revenue, with analysts modeling incremental quarterly recurring revenue and one time catch up revenue that support near term earnings upside.
• Raised outlooks for upcoming quarters, including higher revenue guidance tied to new licenses, are cited as reinforcing the view that execution in smartphones is tracking ahead of prior expectations and reducing risk in forward growth estimates.
• Analysts describe the large streaming video licensing opportunity as a meaningful medium term growth driver and argue that early progress across all three key verticals strengthens the case for ongoing multiple expansion.

Bearish Takeaways

• More cautious analysts maintain a neutral stance despite higher price targets and note that a portion of the recent upside is already reflected in the share price and that valuation assumes continued flawless execution.
• There is concern that revenue growth remains heavily dependent on successfully securing and renewing large licensing agreements, which can be lumpy and introduce volatility into quarterly results.
• Some see risk that expectations for streaming and broader consumer electronics licensing could take longer than anticipated to fully materialize. In their view, this would pressure the premium growth assumptions embedded in forward estimates.
• Rising long term forecasts for revenue and earnings are seen as heightening the risk that any slowdown in deal activity or delays in closing new partnerships could trigger multiple compression from current target levels.

What's in the News

• Raised third quarter 2025 guidance, now expecting revenue of $155 million to $159 million and diluted EPS of $1.39 to $1.56, up from prior ranges of $136 million to $140 million and $0.94 to $1.11 respectively (Corporate Guidance: Raised).
• Issued new guidance for fourth quarter and full year 2025, targeting Q4 revenue of $144 million to $148 million and full year revenue of $820 million to $824 million, with full year diluted EPS of $11.27 to $11.50 (Corporate Guidance: New/Confirmed).
• Approved a 17% increase in the quarterly dividend to $0.70 per share, effective with the fourth quarter 2025 payment, and declared a $0.70 dividend payable on October 22, 2025 to shareholders of record on October 8, 2025 (Dividend Increases).
• Reported progress on its long running share repurchase program, buying back 171,529 shares for $50.24 million between July 1 and October 30, 2025, and completing total repurchases of 18,308,679 shares for $1.23 billion under the plan launched in 2014 (Buyback Tranche Update).
• Announced renewed and new licensing deals, including a renewed patent license with Sharp covering 4G, 5G, Wi Fi, and HEVC technologies, a new license with a home and commercial EV charger manufacturer, and a U.S. Department of War contract to lead AI driven spectrum coexistence research with partners DeepSig and Skylark Wireless (Client Announcements).

Valuation Changes

• Fair Value Estimate, unchanged at approximately $412 per share, indicating no material shift in the base case intrinsic valuation.
• Discount Rate, risen slightly from about 8.56% to 8.61%, reflecting a modest increase in the required return applied to future cash flows.
• Revenue Growth Assumption, effectively unchanged at roughly minus 12.82%, signaling no revised expectations for top line contraction in the current model.
• Net Profit Margin, essentially flat at around 30.38%, indicating stable expectations for long term profitability.
• Future P/E Multiple, risen slightly from about 70.5x to 70.6x, suggesting a marginally higher valuation multiple applied to projected earnings.