Well, I hate to be the one to say I told you so, but, I told you so. Back on April 26th I mentioned that InterDigital, Inc. (NASDAQ:IDCC) was primed to continue rallying despite disappointing earnings news; it was the brush and bounce off the 200-day moving average line that suggested it. Sure enough, IDCC has moved from $43.32 then to the current price of $45.57. That's a 5.2% romp in less than two weeks, which admittedly isn't a lot, but I think this is also just the beginning of the runup.
InterDigital makes wireless networking equipment. Well, more specifically, the company owns patents on several of the technologies that make your smartphone and your mobile device work. For use of this proprietary technology, technology manufacturers pay IDCC a royalty, or licensing fee.
That's not the interesting part of this story though. No, what's interesting here is that the rebound rally has unfurled despite disappointing quarterly results posted back on the 26th. InterDigital lost $0.30 per share, which was worse than the anticipated $0.20 loss.
How's that happen? Like I said then, the worst-case scenario - and then some - was already priced into the value of IDCC shares. With no one left to actually sell it, the would-be buyers were more than happy to step in and start scooping up the oversold stock.
It wasn't until today, however, that InterDigital, Inc. dealt a decisively bullish blow, via the cross above the 50-day and 100-day moving average lines. With no more ceilings in place, IDCC shares are "free to move about the cabin." That pullback in April simply hit the reset button for the bigger-picture uptrend. We can take it all at face value.
What's compelling about InterDigital is that it's one of the few IP companies that doesn't act - or present itself as anything but - a patent troll. That's because it's not a patent troll simply looking to litigate whenever and wherever it can, and annoy defendants into submission. It's got real technologies, and other companies use them and are willing to pay a reasonable royalty for them. That translates into a sustainable business model with relatively reliable revenue (and growth). Throw in the fact that IDCC seems to be defining the blooming machine-to-machine market on its own terms, and there's a lot unrealized opportunity in that space.
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