INTERDIGITAL, INC. (IDCC): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/IDCC

Headline

Field	Value
Ticker	IDCC
Company	INTERDIGITAL, INC.
Current price	$262.08/sh
Composition	Smartphone 81% / CE, IoT/Auto 19% / Other 0%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	8.6%
Operating margin today	49.6%
Margin compression (value-band)	-41.0pp
Implied growth	8.4%
Multiple paid	16x operating income

The operating-margin figure is value-band context at year 8: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.2% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~5.5pp.

How unusual the bet is: within-range

Reference	Value
vs own history	-0.51σ
cohort percentile (of 190 peers)	18
implied end-window share	0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	1.71x	5	expensive
Earnings	2.11x	5	expensive
Relative	1.26x	3	expensive
Growth	0.83x	3	justifies

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=16)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$493.95	0.53x	yes	FCF base $0.6B, growth 6% (input: historical growth), terminal g 4.0%, WACC 8.9%, 6yr projection
DCF Exit Multiple	Growth	$315.65	0.83x	yes	Exit EV/EBITDA: 13.3x / 15.3x / 17.3x (bear / base = today's held flat / bull), 6yr
Relative Valuation	Relative	$238.74	1.10x	yes	P/E 18x (static sector reference · 2026-04), scenarios: 15.0x / 18.0x / 21.0x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$153.25	1.71x	yes	BV/sh $42.72, ROE (TTM) 33.2%, ke 9.3%
Two-Stage Excess Return	Asset	$305.92	0.86x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$196.80	1.33x	yes	Rev $0.8B, growth 6% (input: historical growth; tapered), Terminal P/S: 6.7x / 8.0x / 9.3x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/E	Relative	—	—	no	—
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$124.09	2.11x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.29B × (1−6%) / WACC 8.9% → EPV (no growth)
Residual Income	Asset	$237.12	1.11x	yes	BV $42.72 + 5yr PV of (ROE (TTM) 33.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$100.41	2.61x	yes	√(22.5 × EPS $10.49 × BVPS $42.72) — Graham's conservative floor
EV/EBITDA Relative	Relative	$207.84	1.26x	yes	EBITDA $0.43B × sector EV/EBITDA 12.0x
FCF Yield	Earnings	$249.84	1.05x	yes	FCF $578.2M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	$231.43	1.13x	yes	SBC-adj FCF $0.53B (FCF $0.58B − SBC $0.04B) capitalized at Kₑ
Ben Graham Formula	Earnings	$45.85	5.72x	yes	EPS $10.49 × (8.5 + 2×-1.6%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$41.73	6.28x	yes	BV $42.72 × (ROIC 8.6% / WACC 8.9%)
P/Sales Sector	Relative	$80.18	3.27x	yes	Revenue $0.83B × sector P/S 2.5x
PEG Fair Value	Relative	—	—	no	—
Earnings Yield	Earnings	$113.41	2.31x	yes	EPS $10.49 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net cash	$693.6m
Net debt / NOPAT (after-tax)	-1.79x (net cash)
Net debt / operating income (pre-tax)	-1.69x (net cash)
Interest coverage	10.5x
Share count CAGR (dilution)	3.1%
Burning cash	no

Bullet Takeaways

• InterDigital owns a deep portfolio of wireless and video patents and earns royalties when device makers license them, a model that produced a roughly 50% operating margin and recurring revenue of $567.2 million, up 13% year over year.
• The recurring base is growing and increasingly diversified: smartphone licensing reached an all-time high, and new deals are pushing into TVs, computer displays, and connected devices beyond phones.
• The defining risk is lumpy, litigation-driven revenue, with full-year 2026 revenue guided to a wide $675 to $775 million range, so the timing and outcome of major license negotiations and court cases swing results from quarter to quarter.

Bull Case

Begin with the bear's strongest point, because confronting it is what makes the bull case credible. The obvious knock on InterDigital is that patent licensing is unpredictable: revenue arrives in lumps when big contracts sign or courts rule, and a quarter that misses a major renewal can look ugly. That is real, and the wide full-year revenue guidance of $675 to $775 million admits it. But the data undermines the fear that the business is merely a series of one-off settlements. Annualized recurring revenue rose 13% year over year to $567.2 million, and smartphone annualized recurring revenue reached an all-time high of $491.8 million. A growing recurring base means the lumps sit on top of a foundation that compounds, which is the opposite of a business living deal to deal.

The moat is the patent portfolio and the legal leverage to enforce it. InterDigital holds standard-essential patents in wireless and video, technologies that nearly every smartphone, television, and increasingly every connected device must use, which gives it a structural claim on a slice of the industry's revenue. The company demonstrated that leverage in the quarter, signing six new agreements including a renewal with Xiaomi and a new license with LG Electronics covering TVs and computer displays, and winning injunctions against Disney and Transsion that reinforce its negotiating position. Each legal win raises the cost of holding out, which pulls the next reluctant licensee to the table. The expansion beyond smartphones into consumer electronics and connected devices widens the addressable royalty base.

The economics and balance sheet are exceptional, which is why only the growth lens reaches the price. The operating margin runs near 50%, return on equity is about 33%, and the company holds a net cash position of roughly $694 million with no net debt and interest coverage above ten times. Licensing is a high-incremental-margin business: once the patents exist and the legal precedent is set, each new license is nearly pure profit. The company returned $114.3 million to shareholders in the quarter through dividends and buybacks. The bull case is that a compounding recurring-royalty base, backed by an enforceable patent portfolio and a fortress balance sheet, justifies paying for durable growth that the static valuation methods structurally cannot frame.

Bear Case

The capital-allocation and governance lens is the right place to press, because for a company whose only real asset is intellectual property, how management deploys cash and protects the portfolio is the whole game. InterDigital returns capital, $114.3 million in the quarter, but the share count is still growing at about 3.1% a year, which means stock-based compensation and issuance are outpacing the buybacks on a net basis. For a business with a 50% margin and a net cash balance sheet, net dilution is a choice, and it quietly erodes the per-share value the buybacks are meant to create. A holder paying a premium multiple is entitled to ask why the share count rises when the cash flow could shrink it.

The deeper risk is the durability of the asset itself. Patents expire, and the value of a licensing company is a wasting asset unless it continually invents and patents the next generation of standards. That requires sustained research spending and, critically, repeated success in getting InterDigital's inventions written into the standards that devices must follow. If the company's portfolio ages faster than it is replenished, or if a future wireless or video standard routes around its patents, the royalty base shrinks. The licensing model also depends on a legal system willing to enforce standard-essential patents at favorable rates, and the regulatory and judicial treatment of such patents varies by jurisdiction and shifts over time. A less licensor-friendly legal environment would compress the rates InterDigital can extract.

The valuation has already priced durable success, which is the arithmetic bear. The price sits above every static valuation method: the asset and earnings-power lenses land near $46 to $224 per share, peer multiples near $152 to $214, and only the growth-DCF models reach the $296 price (June 27, 2026), and they do so by crediting continued compounding of the recurring base. The implied assumption is roughly 7% sustained growth in the royalty stream, which requires both portfolio renewal and continued legal wins. The reliance on lumpy, negotiation-driven revenue makes any single year hard to predict, and the wide guidance band is the company telling you so. The downside is not solvency; the net cash balance sheet makes that a non-issue. It is that a stock priced for durable royalty compounding is exposed to portfolio aging, adverse legal or regulatory shifts, and the dilution that quietly trims the per-share return even in good years.

Valuation

What the price assumes is durable compounding of a high-margin royalty stream. The inversion reads the embedded growth at roughly 7%, sustained, on a business that already earns a near-50% operating margin. For a patent-licensing company, that is a bet on the portfolio staying essential and the recurring revenue base continuing to grow, which the recent recurring-revenue figures support but which is never guaranteed for a wasting intangible asset.

How far the price sits from the methods is the defining feature: only the growth lens reaches it. The asset and earnings-power methods, reading book value and capitalizing current profit, land far below, near $46 to $224 per share, because they cannot price the option value of an enforceable patent portfolio. Peer multiples land near $152 to $214. The growth-DCF models reach the price, with the perpetual-growth DCF near $352 and the exit-multiple DCF near $307, by crediting the next several years of royalty compounding. The pattern is clear: this is a durability premium that the static frames structurally cannot capture, not a price that any backward-looking method endorses. The spread between the price and the static methods is large, two to three times on the earnings-power lens, and that spread is precisely what the buyer is paying for the moat.

Solvency is a non-issue and a genuine strength. InterDigital holds about $694 million of net cash, no net debt, and interest coverage above ten times, so the balance sheet poses no downside risk whatsoever; if anything, the cash is underused. The one mark against the capital picture is the share count growing about 3.1% a year despite active buybacks, which dilutes the per-share claim on the royalty stream. The decisive number for InterDigital is not a valuation output; it is whether the recurring royalty base keeps compounding at the pace the growth-only valuation requires, because that compounding is the sole pillar holding up a price that every other method calls rich.

Catalysts

InterDigital reported first-quarter 2026 results on April 30, 2026, and topped the high end of its guidance. Revenue was $205.4 million, ahead of the roughly $201 million expected, with GAAP diluted earnings per share of $2.14 and non-GAAP earnings of $2.57. The quarter was driven by six new licensing agreements, including a renewal with Xiaomi and a new license with LG Electronics covering TVs and computer displays, alongside legal injunctions against Disney and Transsion that strengthened the company's enforcement position. Annualized recurring revenue rose 13% to $567.2 million, and smartphone recurring revenue hit an all-time high of $491.8 million.

The forward setup combines reaffirmed guidance with the lumpiness inherent in the model. Management held full-year 2026 revenue guidance of $675 to $775 million, with second-quarter revenue guided to a much lower $139 to $143 million, a reminder that licensing revenue is uneven across quarters as deals and rulings land. The company returned $114.3 million of capital in the quarter. The watch items are the cadence of major license renewals and new signings, the outcomes of ongoing litigation that set the leverage for future negotiations, and the pace of expansion into consumer-electronics and connected-device licensing, because the growth in the recurring base is what the valuation depends on.

Peer Cohorts (Per Segment, With Filing Citations)

InterDigital (single segment) (reported)

• DLB (DOLBY LABORATORIES, INC.)
• FY2025 10-K: …overstated goodwill as of the quarter ended June 30, 2023. We evaluated the error quantitatively and qualitatively, and determined that the related impact was not material to our condensed consolidated financial statements for the third quarter of fiscal 2023. Accordingly, we have revised the previously reported…
• FY2025 10-K: …2024-09-28 2025-09-26 0001308547 us-gaap:EmployeeStockOptionMember 2025-09-26 0001308547 us-gaap:EmployeeStockOptionMember 2024-09-28 2025-09-26 0001308547 us-gaap:RestrictedStockUnitsRSUMember 2025-09-26 0001308547 2009-11-30 0001308547 dlb:AdditionalStockApprovedMember 2010-07-31 0001308547…
• RMBS (RAMBUS INC)
• FY2025 10-K: …31, 2025 , refer to Note 10, "Leases." (3) The Company has commitments with various software vendors for agreements generally having terms longer than one year . Indemnifications From time to time, the Company indemnifies certain customers as a necessary means of doing business. Indemnification covers customers for…
• FY2025 10-K: …2024-12-31 0000917273 rmbs:LongTermIncomeTaxesPayableMember rmbs:NationalTaxServicesMember us-gaap:ForeignCountryMember 2025-09-30 0000917273 us-gaap:MachineryAndEquipmentMember 2024-12-31 0000917273 rmbs:LongTermIncomeTaxesPayableMember 2024-12-31 0000917273 rmbs:PotentialAdditionalPerformanceStockUnitsDomainMember…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

InterDigital Q1 2026 earnings release, April 2026