Foolish Forecast: Qualcomm Calling
Tuesday January 24, 10:06 am ET
By Rich Smith (TMFDitty)
Get ready to be inundated with earnings analyses. One of Wall Street's most popular stocks, Qualcomm (Nasdaq: QCOM - News), reports tomorrow, and there should be no lack of punditry in the aftermath. Before the rush begins, though, let's take a look at a few of the numbers that matter.
Wall Street Wisdom:
General consensus. Blue Horseshoe loves Qualcomm -- and so do the analysts. No fewer than 37 of them follow Qualcomm, and the vast majority love the stock, which gets nine "holds" and a single "sell" -- with everyone else cheering "buy!"
Revenues. Really, with numbers like these, who wouldn't love Qualcomm? Analysts believe the company boosted its revenues by 26% to $1.75 billion in its fiscal first quarter of 2006.
Earnings. They think profits did even better, and they predict that Qualcomm earned $0.38 per share -- a 36% increase over last year's Q1.
Margin watch:
But if you really want to know why analysts love Qualcomm, just take a look at its margins. It's not often you find a company sporting 40% operating margins or a 30% net this side of Microsoft (Nasdaq: MSFT - News). True, the operating margins have been on a bit of a slide recently, but just a bit -- and for good reason. As my fellow Fool Dave Mock pointed out a few months back, Qualcomm has upped its research-and-development expenditures significantly in recent quarters, so that operating margin pullback might be likened to the compressing of a spring. It looks smaller now, but wait until it releases.
Margins % 6/04 9/04 12/04 3/05 6/05 9/05
Gross 70.6 69.6 69.5 69.4 69.1 71.0
Op. 43.6 42.2 41.2 40.1 39.0 41.6
Net 34.9 35.2 37.2 36.9 38.2 37.8
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing=12-months performance for the quarters ending in the named months.
Valuation metrics:
High quality rarely comes without a high price tag. If you want to own a piece of Qualcomm, it's going to cost you 37 times earnings (and the same multiple to free cash flow) to do it.
Competitors:
Here's a nice dilemma to have: Qualcomm's biggest competitors occasionally pay it royalties for using its technology. They include Nokia (NYSE: NOK - News) and Texas Instruments (NYSE: TXN - News).
Microsoft is a Motley Fool Inside Value recommendation.
Fool contributor Rich Smith owns shares of Nokia. |
