Although I claim no ability to predict short-term stock movement, I can't say I agree with your comparison analysis of QCOM and WIND.
>WIND arguably may still be in the story stock phase
WIND blew past that point quite awhile ago. As a matter of fact, it thought it had past that point when it first went public, but it ran into execution difficulties that took a couple of years to get completely straightened out.
You don't have to even know the embedded systems story to want to buy the stock. The stock has accelerating revenue growth around 50% with at least comparable earnings growth. The "story" of embedded systems is run-time license revenue, and WIND is currently enjoying plenty of that - about 22% of revenues stemmed from run-time licenses last year, not in one or two years maybe, but last year. Net, after tax profit is over 20% of revenues.
This is not a story stock. This is a growth stock with a story.
>Herein lies the difference, in my opinion, between QCOM and WIND. QCOM has the potential of some very pleasant surprises in less than 3 weeks, when they announce earnings.
I agree with you that QCOM might surprise everyone with their upcoming earnings announcement - lets just hope it is a pleasant surprise.
>WIND, on the other hand, may be a yr or more away from showing its true colors.
WIND's colors are showing NOW. Do not expect triple digit revenue or earnings growth to "pleasantly" surprise you this year or next year. Instead, expect revenue and earnings growth to continue unabated at 40% or more this year, next year, the following year, ., the following year. Consistent, year after year, 40% growth might put you to sleep, but the consolation is you will be able to sleep in comfort. Thirty-five to forty percent growth doubles every couple years. Keep that up for 20 years and your $100K investment will be worth $100 million. Maybe that will wake you up.
>As a result, WIND will be a lot more volatile than QCOM in the immediate future.
I never know what will happen in the immediate future, but given that QCOM pleasantly surprises us, and triple digit revenue growth continues, and earnings start to catch up, and given that WIND behaves as I described above, then as this market returns to normalcy, you can expect QCOM to show much more volatility than WIND.
Volatility is almost exclusively a result of the market's reappraisal of a stock's future stream of earnings. When companies experience periods of very high growth, assessment of future earnings becomes almost impossibly difficult and subject to blowing winds. Consequently, this gives rise to extreme and rapid changes in assessment. Any change in assessment is almost instantly reflected in the current market price of the stock, causing extreme volatility.
As the market becomes convinced that WIND will produce consistent earnings growth, it will reward it with a high PE ratio and more consistent assessment of future earnings. The former will boost the price of the stock over and above earnings growth, while the latter will help keep it there. This being said, however, it must be recognized that any high-growth stock must endure relatively high volatility when compared to the blue chips.
>I agree that if one is not an investor with a strong stomach, stay away from either stock. Come to think of it, you need a strong stomach just to stay invested, the way the market has been behaving.
Nobody can argue with that. Not now anyway.
Allen |
