Shares of InterDigital (Nasdaq: IDCC) hit a 52-week low last week. Let's take a look at how the company got there to find out whether cloudy skies remain on the horizon.
How it got here
InterDigital's been the very picture of a company that lives and dies by the buyout rumor over the last year. About a year ago, the patent-portfolio player got swept up in a frenzy whipped by major mobile players. For a while, it looked like Google (Nasdaq: GOOG) might sweep in and be the company's white knight, but InterDigital never recovered after Big G set its sights on Motorola Mobility instead. Two consecutive disappointing earnings reports in 2012 kept the pressure on InterDigital's stock, and it's been almost entirely downhill for months:
IDCC Total Return Price data by YCharts
Of the major patent-portfolio players, only VirnetX (NYSE: VHC) can truly claim to have done well in the past year, and that gain's been almost entirely built on anticipation. The company hasn't generated any real revenue for a long time, but the faint possibility exists that VirnetX might win a windfall from Apple (Nasdaq: AAPL) if the House of Jobs is found to have used VirnetX's patented VPN technology.
What you need to know
InterDigital isn't the worst-performing, patent-portfolio company, but it does have the lowest expectations. Analysts have predicted that the company's earnings will reverse course over the coming years, while others' are projected to grow:
|
Company |
TTM Revenue |
Projected 5-Year Growth Rate (annualized) |
Net Margin (TTM) |
|---|---|---|---|
| InterDigital | $292.6 million | (23.2%) | 26.3% |
| VirnetX | $3,000 | 15.0% | NM |
| Rambus (Nasdaq: RMBS) | $312.7 million | 10.0% | (21.3%) |
Source: Yahoo! Finance. NM = Not material due to lack of earnings.
Despite being the only one of three with positive earnings, as well as a decent 1.8% yield, InterDigital has been left for dead by market pros. The company's plans to sell off its patents haven't convinced the market that it's anything other than a value trap. There may be hope ahead for InterDigital if it can wrangle royalties out of companies building the "Internet of Things". But if Rambus' long and frustrating court fights to defend its intellectual property are any indication, smaller patent players might just wind up against a classic delay defense from the tech sector's big boys until their options run out.
What's next?
Where does InterDigital go from here? That may depend more on companies like Apple and Google than on anything InterDigital itself can come up with. My fellow fool Anders Bylund feels like the patent gold rush is over, which would spell doom for investors hoping for a future buyout or monster licensing deal.
The Motley Fool's CAPS community is still keen on InterDigital's prospects, granting the company a four-star rating. Only 4% of CAPS players expect the stock to continue its 52-week trend. That's quite the united display of optimism!
Interested in tracking this stock as it continues on its path? Add InterDigital to your Watchlist now for all the news we Fools can find, delivered to your inbox as it happens. If you're still on the hunt for a stock that can grow right along with the mobile revolution, check out The Motley Fool's free report on one company positioned at the crossroads of old and new computing paradigms. It's at the heart of a trillion-dollar opportunity, so don't miss your chance to join the ride. Click here for the free information you need to buy your next winner.
