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Chase H&Q crushes Qualcomm
But analyst?s competitors disagree with his view
By Susan Lerner, CBS.MarketWatch.com
Last Update: 12:32 PM ET Jun 15, 2000 NewsWatch
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NEW YORK (CBS.MW) - Shares of Qualcomm tumbled Thursday after a Chase H&Q analyst told clients he saw no positive news in sight for the company.
Although he didn?t actually move to a ?sell,? analyst Edward Snyder put a $50 12-month price target on the stock, which closed at 70 1/2 Wednesday, and had nothing good to say about the developer of CDMA technology (QCOM: news, msgs).
Shares plummeted 8 3/16 to 62 5/16 in Thursday trading, with a more positive analyst view from First Union Securities unable to help the stock. Thursday?s fall comes on the heels of a 13 percent drop Wednesday, when Bear Stearns lowered its estimates following a presentation by Qualcomm at the Bear Stearns Technology Conference in New York.
?(The) likely slowdown in Korea due to the recent elimination of handset subsidies could reduce worldwide CDMA handset sales by 10 to 15 percent,? Snyder said in his note to clients.
And China isn?t looking very good for the company either, according to Snyder, who believes it is unlikely a cdmaOne network or its derivatives will ever be deployed in China given GSM?s worldwide market dominance and the technology?s significant head start in China.
Against this backdrop, he lowered his fiscal 2000 earnings estimate to $1.07 per share from $1.11 and his fiscal 2001 forecast to $1.27 from $1.49.
The situation at Globalstar (GSTRF: news, msgs), in which Qualcomm has a 6.4 percent stake, also could be a psychological drag on the company, Snyder said, calling the situation ?eerily reminiscent of Iridium?s demise earlier this year.
What you talking ?bout?
First Union Securities analyst Mark Roberts couldn?t disagree with Snyder more.
?We can find no evidence of a slowdown in the global demand for CDMA handsets - even considering the likely slowdown of growth in Korea,? Roberts said in his note to clients.
He also believes investors are still ?confused? about Qualcomm?s patent/license position with regard to third generation technologies.
Roberts said he thinks investors are taking a ?very simplistic? view of the situation and that he remains comfortable with his above consensus estimates of 33 cents a share and $1.11 for the fourth quarter and all of fiscal 2000, respectively.
?We believe there is no real risk to our FY01 earnings estimates from either Globalstar or the volatile situation in China,? Roberts said as he reiterated his ?strong buy? recommendation on the stock.
Ragen MacKenzie analyst James Reynolds also reiterated his ?buy? rating on the shares and maintained his earnings estimates Thursday morning.
?The company is well positioned to collect substantial royalties and sell large volumes of semiconductor devices from the use of its CDMA technology for wireless telephone, wireless Internet access devices and 4G wireless technology,? Reynolds said in his research note.
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Susan Lerner is a reporter for CBS.MarketWatch.com.
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