Investors should buy Qualcomm shares because the financial benefit from the NXP acquisition will add significantly to earnings next year, according to JPMorgan, which upgraded its rating on the company to overweight from neutral.
Qualcomm licenses its wireless technology and manufactures mobile chipsets. It agreed to buy chipmaker NXP Semiconductors in October for about $38 billion.
The company is under pressure this year due to a royalty dispute with Apple. Qualcomm shares are down 12 percent year to date through Friday compared with the S&P 500's 6 percent return.
"We believe that there remains plenty of headline risk from the ongoing dispute with Apple. However, we believe the shares are discounting a significant amount of this risk now," analyst Rod Hall wrote in a note to clients Monday. "We believe there is material fundamental upside given the expected closure of the NXPI acquisition by the end of this year."