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Apple's fight with Qualcomm is getting 'ugly,' but Wall Street isn't too worried

  • Qualcomm is suing to bar U.S. iPhone imports on the grounds of patent infringement.
  • Shares of Apple and Qualcomm are about 1 percent higher.
  • The most likely outcome of the fight is a settlement, according to a note by CFRA's Angelo Zino.

A legal battle between Apple and supplier Qualcomm is getting nasty, but the drama hasn't dethroned Apple in the eyes of Wall Street.

Qualcomm waged another battle against the world's most valuable public company on Thursday, suing to bar U.S. iPhone imports on the grounds of patent infringement.

This week's lawsuit was the latest in a string of fights between the tech companies, which have sparred over whether the royalties Apple pays for Qualcomm technology are too high.

But by Friday afternoon, Apple and Qualcomm share prices were about 1 percent higher, despite what RBC analyst Amit Daryanani called a "long and ugly battle."

While Qualcomm has opted to play hardball with Apple, the most likely outcome of the lawsuits is a settlement, according to a note by CFRA's Angelo Zino.

Though dealing with trade regulators may be faster than a court case, it's still a "glacial" path for Qualcomm, Bernstein analyst Stacy Rasgon wrote in a note titled, "Qualcomm: 'You wanna play it soft, we'll play it soft. You wanna play it hard? Let's play it hard.'"

"[W]e would not expect this new case to put much incremental pressure on [Apple] to drive to a settlement anytime soon," Rasgon wrote. "More aggressive actions such as withholding chipsets would be far more drastic (and possibly more effective!), but also would play into the meat of recent regulatory cases against [Qualcomm]; so far the company has indicated they are not contemplating such a move."

Qualcomm, however, is signaling that it will defend itself against other manufacturers that may have violated patents, analysts wrote.

"This, of course, suggests that many companies are likely (technically) in violation of these patents, with QCOM attempting to send a message that they have ammunition to go after bad actors if necessary. We shall see," Rasgon wrote.

Wells Fargo analyst Maynard Um said in a research note that these ongoing legal battles could create share price volatility for the companies. Still, high expectations for Apple's next iPhone remain the focus of Apple investors.

Analysts at Nomura, for instance, are more focused on U.S. mobile carrier promotions for the iPhone 8 and demand for iPhones in China this week. Citi analysts have focused analysis on potential delays in iPhone 8 shipments. Raymond James said it is watching early demand for Apple Watch, AirPods and HomePod.

Even if courts stop Apple's iPhone imports, "Apple would just resume paying ... Qualcomm licensing fees and then continue to battle Qualcomm in courts as Apple works to lower its royalty payments to Qualcomm," Canaccord analyst T. Michael Walkley wrote. "Therefore, we do not believe the Qualcomm ITC complaint creates risk to our 2018 Apple estimates."

Watch: Qualcomm sues Apple for patent infringement