Analysis of QCOM Post 2010 Revised Guidance & Selloff
By nym5590 on Tue, 2010-02-02 00:50
(via prudentstockinvesting.wordpress.com)
Report on (QCOM) The conclusion of the article is pasted in quotes below.
"QCOM is a STRONG BUY at current levels. Our very conservative near-term price target of $48.40 plus $0.67 per share in dividends implies a 1-year return of 23%, and LT price target of $53.13 implies a return of 33%. QCOM free cash flow generation and strong balance sheet provide a strong foundation for QCOM to defend is competitive position in the wireless sector and their Earnings Yield of 8.14% confirms that we are being amply compensated for holding the shares."
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www.prudentstockinvesting.wordpress.com
QCOM – The quarter was yet another miss and shares sold off with the momentum investor running towards the fire escape due to the faintest smell of smoke. I am not going to get into much of the technicals, because my philosophy has not changed since my 2/2 post, and it would be like watching that horrid movie Ground Hog Day, or in this case rereading my 2/2/10 post. My estimates are exactly the same, and believe it or not even wall street analyst have quietly turned positive on the stock with a Median 12-month Price Target of $49, implying 31.37% upside from our current price. (next eps release is 7/21/10)
On the quarter, plain and simple, the acceleration in 3G growth in emerging market China and India have been slower then anticipated. Thus, uncertainty-surrounding the3G emerging market ramp up caused management to be cautious (which they almost always are) and analyst to cut their forward 12-month numbers because forward guidance was weak. I will repeat, QCOM runs a near monopoly business and it is not a matter or if, but when the 3G uptake in emerging markets begins to accelerate. Finally, Research in Motion (RIMM), the maker of Blackberry that run using QCOM’s technology, in their latest quarterly conference call pointed to none other then the emerging markets as their next driver of growth, so it may not be that far away.
Before the Quarterly earning announcement QCOM also did two things that typically reinforce my comfort in an investment. Return of capital to shareholders via a 12% dividend increase and a new announced $3.0 billion stock repurchase program due to the recently complete $2 billion stock repurchase program. I know one thing, management typically knows more then the public, and if they want to purchase shares at these levels to increase owner’s equity, then so do I! ( Just and FYI, QCOM unlike many companies does not implement a share buyback program to hide excessive option awards to management)
Please read my 2/2/10 post at www.prudentstockinvesting.wordpress.com for additional information.