InterDigital Inc (IDCC)

Investment Committee Summary

Investment Thesis

InterDigital designs and develops technologies that enable and enhance wireless communications, in the United States and internationally. The engine maps it onto a communications-equipment driver set — networking and data-centre capital spending, service-provider budgets — which is an approximation worth flagging, because a margin near 30% on a research-led revenue base does not behave like an equipment cycle. At $341 on 9 September 2026 the shares are trading rich to the engine's triangulated value (-26%), on 39 times forward earnings, and that multiple is the whole debate: it prices continuation of the current revenue run-rate on a business whose revenue arrives in agreements rather than in units, and therefore steps rather than glides. The balance sheet is not the constraint; it carries net cash of ~$0.2B. One disclosure belongs in the open: the simulation puts the probability of fair value clearing today's price well below the band this house treats as plausible, which flags either a genuinely stretched quote or an over-severe bear weighting, so $251 should be read as a direction rather than a decimal. The most damaging risk is renewal — a revenue base of expiring agreements is worth the terms of the next one, and a gap between them lands in a single reporting period.

Narrative drafted 2026-08-16 by claude-opus-5 under supervision; reviewed by Marinus 2026-08-16.

The dashboard below is the whole argument on one page: spot ($341) against each valuation anchor, the scenario tree, technicals and the options-implied move.

Anti-Thesis (The Real Bear Case)

Start with the arithmetic of a high multiple. At 39 times forward earnings, most of the market value is the multiple rather than the earnings, so the bear case does not need a collapse — it needs a pause. If the counterparties who renew agreements slow their own spending, or negotiate harder because their equipment cycle has turned, revenue does not decline gently; it resets at the next signing and stays there. A margin near 30% then works in reverse, because the research cost base that produces the technology is committed years ahead of the revenue it earns. A de-rating toward an ordinary technology rating, applied to a lower revenue base, is a double compression, and it is the structural state the engine prices — with a target below the 52-week low. Modest net cash cushions the balance sheet and does nothing at all for the multiple.

Key Debate

P/E Multiple explains 80% of Monte Carlo outcome variance — i.e. value is set by the multiple the market will pay, a rate/sentiment regime bet as much as an earnings bet.

What the Market Is Pricing In

At the current price, the market pays 29.5× consensus forward EPS, vs the house DCF terminal 26.0×, and a peer median 12.3×. The house DCF sits 27% below spot, so the market is pricing in more than the house case — roughly 3.3pp of revenue CAGR.

Variant perception: the house view is below-consensus, and the thesis is primarily growth-driven.

Scenario Analysis

The scenario tree spans a structural 'Structural — Capex Cyclicality / Share Loss' downside ($115) to a 'Bull — Re-Rate' bull case ($462); the probability-weighted blend (PWEV $261) is -23% versus spot.

Share-count charge: none applied. The probability-weighted value above is the gross per-share figure — no annual dilution is deducted — stock-based compensation runs at 5.4% of revenue; free cash flow net of SBC is $0.49B. SBC is therefore disclosed, not charged: read the per-share figures as before dilution.

Scenario rationale — the driver path behind every target:

• Structural — Capex Cyclicality / Share Loss (20%, $115). Structural impairment — capex cyclicality / share loss: earnings AND the multiple compress together. Target sits below the 52-week low by construction.
• Service-Provider / Enterprise Recession (17%, $195). Cyclical downturn — networking / datacenter capex + AI back-end (optical / switching) + service-provider spend weakens for 1–2 years before normalising.
• Base — Refresh + Datacenter Demand (35%, $271). Mid-cycle — normalised networking / datacenter capex + AI back-end (optical / switching) + service-provider spend; disciplined capital allocation; steady returns.
• Growth — AI Back-End (Optical / Switching) (20%, $366). Upside — AI back-end optical & switching lifts earnings above mid-cycle; the multiple expands modestly.
• Bull — Re-Rate (8%, $462). Upside tail — sustained tight conditions or a structural re-rate on AI back-end optical & switching.

Valuation Triangulation

Three weighted anchors — an intrinsic dcf, a scenario-weighted pwev and a monte carlo median (student-t + regime switching) — read them with their basis in mind. The Monte Carlo, the DCF terminal and any peer re-rate key off a market multiple, so they are not fully independent; only discounted cash flows themselves are genuinely multiple-free. The discipline is to read the spread and weight the cash-based view, not to treat three numbers as three independent votes.

The house blend DECLARES five anchor weights — DCF 35%, scenario PWEV 25%, Monte Carlo 15%, sum-of-parts 15%, peer re-rate 10%. For this name sum-of-parts, peer P/E re-rate are not computed, so 25% of the declared weight is redistributed across the anchors that exist — which is why the weights above differ from the declared ones. The fair value is unaffected by this disclosure; the blend has always worked this way.

Peer EV/Revenue re-rate — 0% weight: it duplicates the peer-multiple information already carried by the Peer P/E anchor while ignoring margin mix; weighting both would double-count the peer view. Shown as a cross-check.

Monte Carlo — the outcome distribution

10,000 paths, Student-t shocks (fat tails) with a regime-switching overlay. The median lands at $235 and 18% of paths finish above spot. The variance decomposition shows the p/e multiple is the dominant swing factor (80% of variance). Value is a multiple bet: fundamentals move the answer far less than the rating does.

DCF — the cash-flow anchor

Independent of the market multiple: a 5-year path, WACC 9.0%, 26.0x terminal FCF multiple → $250. This anchor is deliberately the heaviest (47%): it is the valuation least hostage to the current multiple regime.

Peer benchmarking — relative value

Against the peer cohort, re-rating to the peer-median EV/Revenue multiple implies $116; the peer-median forward P/E is 12.3x, but the engine carries no P/E-implied price for this name (no forward-EPS basis at the peer step). A premium is only justified by superior growth/margins; otherwise it is multiple risk. Excluded from the weighted blend — shown only as a market cross-check.

Across all anchors the spread is 58% of the median — wide (genuine disagreement — the blend carries low valuation confidence).

Sensitivity

DCF/share — WACC × terminal multiple

DCF/share — revenue CAGR Δ × op-margin Δ

Tornado — DCF/share swing by driver (widest first)

Company lever — SoP/share vs Communications Equipment multiple (AI re-rating) (base 30.0x)

Peer Quality & Weighting

Quality-weighted forward P/E: 21.9× (simple median 12.3×). Direct peers count 100%, segment 50%, broad 25%.

Historical-range cross-check: 52-week range $211–$410, centre $294 (-14% vs spot); spot sits at the 65th percentile of the range. Low-weight mean-reversion cross-check, not a fundamental anchor.

Risk / Reward & Margin of Safety

That ratio compares triangulated upside against the probability-weighted bear target, not the extreme tail; with a leg missing it is withheld rather than computed from a magnitude. Bull case (Bull — Re-Rate): $462.

Company Overview & Business Model

InterDigital Inc — TECHNOLOGY · SOFTWARE - APPLICATION. InterDigital, Inc. designs and develops technologies that enable and enhance wireless communications in the United States and internationally. The company is headquartered in Wilmington, Delaware.

How it makes money.

Edge. Wide moat — inferred from a 30% operating margin and the communications equipment business model. Durable pricing power supports a terminal multiple above the market.

Revenue-Segment Breakdown

The company-specific drivers behind the valuation — each segment carries its own growth, margin, multiple and capex intensity. (Tags: FACT reported · ESTIMATE from disclosures · INFERENCE judgment.)

Named Exposures

Demand & pricing cycle (FACT/ESTIMATE)

Capital intensity & shareholder returns (ESTIMATE)

Structural risk vs optionality (INFERENCE)

Industry Context — Information Technology — Comms Components

This name sits in the Information Technology — Comms Components cluster as a communications equipment name. networking / datacenter capex + AI back-end (optical / switching) + service-provider spend. Its scenarios are not guessed in isolation — they inherit a single, shared view of the cluster's driver cycle, so the names that depend on the same event are mutually consistent.

Value chain: CGNX (electronic components & instruments) · LFUS (electronic components & instruments) · VIAV (communications equipment) · IDCC (communications equipment) · NOVT (electronic components & instruments) · VNT (electronic components & instruments) · BDC (electronic components & instruments) · CXT (electronic components & instruments)

Mapping note: name-level 'Structural — Capex Cyclicality / Share Loss' (20%) + 'Service-Provider / Enterprise Recession' (17%) map to cluster Capex Cyclicality / Content Reset (37%); name-level 'Growth — AI Back-End (Optical / Switching)' (20%) + 'Bull — Re-Rate' (8%) map to cluster Upside — AI Back-End / Datacenter Content (28%) — the cluster row is the SUM of the mapped scenario probabilities, not a different estimate.

On the cluster's key downside — Capex Cyclicality / Content Reset — this name implies 37% vs the cluster house view of 37% (in line with the house). The cluster's full cross-stock reconciliation governs that the names which ride the same capex cycle assign it comparable odds.

Structure: Shared State — The Information Technology — Comms Components cycle is the shared macro driver. Driver — networking/datacenter capex + AI back-end (optical/switching) + electronic content. Dispersion — Members differ by cyclicality (quality compounders vs deep cyclicals).

Balance Sheet & Liquidity

Balance-sheet data as of 2025-12-31 (Alpha Vantage).

Capital Allocation

Free-Cash-Flow Quality

Accounting quality: SBC 1% of revenue; cash conversion (OCF/NI) 134% — cash-backed.

Earnings-Call Disconfirmation & Sentiment

Derived signals from the MCH market-data store (Alpha Vantage transcripts + news). Quantitative tone only — a disconfirmation flag, not a substitute for reading the call.

Management vs analyst tone (2026Q1): management +0.43 vs analyst floor +0.00 → delta +0.43 (n=12 mgmt / 7 Q&A; 57th pctile across the S&P book, z +0.2).

Flag: TYPICAL — management-vs-analyst tone within the normal cross-sectional range.

News (last 365d, 529 articles): avg ticker sentiment +0.23 (bullish 38% / bearish 4%)

Consensus & Market Expectations

_Consensus figures: Alpha Vantage sell-side aggregates. Where the house view sits materially above or below the street, the divergence is itself a datum — see the thesis.

Catalyst Calendar

• 2026-10-29 (~51d) — Quarterly earnings — est. EPS $1.69 (AV EARNINGS_CALENDAR)

Forecast Track Record

• EPS surprise: beat 88% of the last 8 quarters; average surprise +57.6%.
• Prior-forecast backtest (19 snapshots, 2026-07-21→2026-09-03): directional hit-rate 74%; mean predicted -17.6% vs realised +7.7%. Disconfirming track record is reported, not suppressed.

Catalyst Timeline

5 catalysts in the next 90 days (of 13 tracked). Importance 1–3; confidence 0–1.

_Sources: extended.catalysts, data/catalysts/.json, data/catalysts/macro.json, AV DIVIDENDS, opex 3rd-Friday calc.

Scenario Macro & Key Risks

Decision Rules (Machine-Checked)

Stance: Hold — 0 bullish / 1 bearish / 0 caution rules triggered of 6 evaluable (0 lacked data).

Machine-checked rules over disclosed inputs. The authored falsification triggers elsewhere in this report are analyst judgment and are NOT evaluated here. The stance is a portfolio-management signal and does not modify the published research rating.

Reasons the Thesis Could Fail (Falsifiable)

Pre-registered signals that would break the thesis — each polices a specific scenario boundary and is checked at every earnings update:

• Organic revenue growth / order backlog < flat-to-negative for two consecutive quarters (2 consecutive prints). Sustained demand rollover breaks the base case toward the recession scenario.
• FY revenue ($B) < 0.85 (next reported fiscal year). (rationale withheld pending re-authoring — frozen figure or verdict)
• Probability-weighted fair value (PWEV) at the next re-run < 340.94 (any scheduled re-run). (rationale withheld pending re-authoring — frozen figure or verdict)

Fact / Inference / Speculation

• FACT: Spot $341; 52-week range $211–$410; engine rating SELL; house target $261 (-23%). (source: Alpha Vantage 2026-09-08, 9 September 2026)
• INFERENCE: Triangulated FV $251 (-26% vs spot · triangulated FV); the rating tracks the Monte-Carlo + scenario-PWEV core; the cash-flow anchor sits below the multiple-discipline core.
• SPECULATION: At current prices the embedded bet is that the market keeps paying the current multiple through the capex cycle — a regime call the engine cannot verify from fundamentals alone.

Conviction Score

Research Conviction measures the strength and quality of the research setup — input coverage, financial quality, valuation support, process agreement. It is NOT the probability that the recommendation succeeds; the forecast track record section is the evidence on that.

74.4/100 (confidence band 63.1–85.8), 98th percentile of 893 covered names (as of 2026-09-08). Weighted composite under config ros-1.20.0 — every component and its inputs below.

Score history: 74.3 → 74.2 → 74.5 → 75.2 → 74.4 → 74.1 → 74.2 → 74.1.

Probability-Weighted Return Profile

Horizon: 1 year — at this horizon CAGR equals total return by definition. Expected values are the probability-weighted sums over the full scenario set below.

The gross expected return is the probability-weighted scenario return (it reconciles to the gross PWEV); the diluted figure applies the SBC share-count charge and matches the published PWEV-based target.

Expected Alpha

Expected return minus the return this name is REQUIRED to deliver for its risk (1-year horizon). Constants are pre-registered (preregistered-static (amendment #2, 2026-07-29); not fitted to MCH outcomes).

A negative expected alpha does not change the rating — it says the expected return does not clear the risk-adjusted hurdle at today's price. Rating mechanics are unchanged by this section.

Probability Cross-Checks

Not authoritative. The scenario probabilities in this report are AUTHORED — a judgement about how the world might go, not a measurement. Nothing below modifies them, the target, the rating or any position size. These checks ask only whether anything outside our own model agrees with us; where it does not, that is information for the reader, not a correction we have quietly applied.

Authored set: 5 scenarios, probabilities summing to 1.0, mean target $261.0.

Factor Exposures

Cross-sectional percentiles over 893 covered names (style scores sector-demeaned; thematic = return-beta to the theme's proxy ETF). 50 = estate median.

Portfolio Interaction (Focus Book)

This name is in the top-conviction focus book. Equal-weight book vol 10.4%; diversification benefit 70.3% vs the gross-weighted average single-name vol — combining correlation, the short leg hedging the long leg, and net exposure below 1.0; not diversification alone.

Options Intelligence

Preferred structure: Put Debit Spread. The selector reads the equity view (direction) and the volatility surface — nothing here re-prices the chain.

• bearish with cheap options — buy defined-risk downside
• Direction bearish from the overlay conviction/rating (read-only input).
• IV/RV at the 12th percentile of the cross-section → low vol bucket. This is the measure that selects the structure above: it ranks how rich this name's implied vol is against its own realised vol, relative to other names.
• Reported alongside and not used to select: this name's own ATM IV sits at the 46th percentile of its own month-end history (decile 5). The two measures disagree here — vol is high for this name by its own history while its options are not unusually rich against its realised vol. Where they diverge, the cross-sectional measure is the one acting.
• IV term structure is in contango (longer-dated richer, slope +7.8pp) — favour longer-dated ownership (LEAPS) or calendars that are long the cheaper front.

IV term structure (contango, slope +7.8pp): 38-DTE 40% · 101-DTE 43% · 465-DTE 48%

Economics copied verbatim from the options overlay (priced from the listed chain (EOD marks)); the selector does not re-price.

Alternatives: Protective Put. IV rank shown via the name's own monthly IV history (advisory); structure selected on the cross-sectional IV/RV percentile. Model output for research and education only — not individualised investment advice. Position-sizing and stance figures are mechanical outputs of the disclosed rules and inputs; they do not consider any person's objectives, financial situation, or tax status.

Position Sizing Framework

research rating is SELL-tier — the model carries no long position.

Model output for research and education only — not individualised investment advice. Position-sizing and stance figures are mechanical outputs of the disclosed rules and inputs; they do not consider any person's objectives, financial situation, or tax status.

Options Overlay

A defined-risk way to express the SELL equity view. Chain as of 2026-09-08 — end-of-day marks — indicative, not executable quotes.

Market signals — ATM IV 40.5% (subdued regime) · expected move ±10.3% (2026-10-16) · put/call OI 0.71 · ATM Δ 0.55 / Θ -0.25 / ν 0.44 · next earnings 2026-10-29. Direction: SHORT/HEDGE (implied return -26.5% to triangulated fair value $250.71).

Bear Put Spread (Bearish) — Long 340 P / Short 250 P · 2027-03-19 · net debit $32.25 · max profit $57.75 · breakeven $307.75 · RoR 179.0% · max loss $32.25 · priced from the listed chain (EOD marks)

Defined-risk downside expression: the debit caps the loss, with the position gaining as the stock falls toward the lower strike — a way to act on a bearish view without shorting stock. Subdued implied volatility currently lowers the premium paid. Illustrative — no outcome is implied or guaranteed.

Protective Put (if held) (Hedge) — Long 340 P · 2027-03-19 · premium $42.4 · floor 0.0% · max loss $42.40 · priced from the listed chain (EOD marks)

Insurance for an existing holding — a known premium buys a floor while leaving the upside intact. A way to hold through a binary event or volatility with defined downside.

Protective Collar (if held) (Hedge) — Long 310 P / Short 380 C · 2027-03-19 · net $5.1 · floor -9.0% · cap +11.0% · priced from the listed chain (EOD marks)

For a holder who wants to stay invested but cap risk: the sold call funds most of the protective put, fencing the position into a band — a way to ride out a de-rating without selling.

Indicative options structures — a defined-risk expression of the equity view, model-and-market illustrated from the last-close chain. NOT personalised advice or an executable quote; premiums, IV and greeks move intraday. Options carry the risk of total loss of premium. Not a registered financial adviser.

Rating Bridge

Rating = SELL because:

• Probability-weighted scenario value implies -23% vs spot
• Monte Carlo median implies -31% vs spot
• DCF fair value implies -27% vs spot — but this is terminal-value sensitive (exit-multiple $250 vs Gordon $171, 32% apart), so it carries less weight
• Bear case (Structural — Capex Cyclicality / Share Loss) downside is -66% vs spot
• Net: the valuation anchor itself sits 26.5% below spot, so there is no reward leg to weigh against the bear case and the reward-to-risk ratio is withheld rather than computed off a negative upside. The rating warrants a Sell.

Model Appendix

DCF — line items

FCF is bridged: NOPAT + D&A − Capex − ΔNWC (capex intensity 4% of revenue, weighted from the segments) — not a single conversion fudge.

WACC 9.0% · Σ PV(FCF) $1B + PV(terminal) $5B = EV $6B; + net cash $0.2B → equity $7B ÷ diluted shares $0.03B = $250/share (exit-multiple terminal).

• Gordon terminal at 2.5% → $171/share — a genuinely non-multiple, cash-based cross-check; the exit-multiple and Gordon values bracket the terminal-value risk.
• Incremental ROIC on the forecast capex ≈ 36% vs WACC 9.0% → above WACC — the build is value-creative.

Peer set

Implied prices at the peer medians: EV/Rev → $116 (no P/E-implied price — no forward-EPS basis at the peer step).

Weighted fair-value math

Assumption Register

Sensitivity-ranked drivers (widest fair-value swing first): Terminal × ±15% (60.0); Revenue CAGR ±3pp (60.0); Op margin ±3pp (44.0); WACC ±1pp (21.0); Capex intensity ±15% (10.0).

Inputs, Sources & Confidence

Every load-bearing input, labelled by type and confidence. (reported fact · company guidance · consensus estimate · market data · house estimate · inference.)

Research Provenance

Load-Bearing Assumptions

DCF: WACC 9.0%, terminal multiple 26×, FY+5 revenue $1B. Triangulation leans 47% on DCF, 33% on PWEV, 20% on the Monte Carlo median.