QCOM--Redherring.com: "Qualcomm gets a second wind"
redherring.com
>>>Qualcomm gets a second wind
Remember when it was cool to own Qualcomm (Nasdaq: QCOM) stock? Well get ready, because just like Charlie's Angels, Qualcomm is coming back into vogue.
After one of the most precipitous falls from grace in recent years, Qualcomm's stock has recently started to show some signs of resiliency. It looks as if the former Wall Street darling finally bottomed out at around $56 and has begun a slower, more measured ascent. And while it takes some fads decades to reclaim the public's interest, Qualcomm slumped for less than a year before its current resurgence, closing Monday at $79.38, a 41 percent increase since August 23.
What's even more impressive about Qualcomm's recent run is the market environment in which the surge occurred. Over the same two months' time that Qualcomm fattened itself up, the Nasdaq lost 16 percent of its value, dropping from 4011.01 to 3355.66 as of Monday. And many other wireless stocks were big losers during this time period.
BOTTOM'S UP
For the wily investor, Qualcomm is proof that money can be made even in the most bearish of markets. While most of the public was running for the exits across the tech sector, institutional investors were quietly loading up on Qualcomm, driving volumes to as high as twice its daily average, a good sign for the stock.
In addition, the company has gotten a huge boost from the news that China Unicom (NYSE: CHU), a telecommunications company with over 14 million subscribers, has revived its plans to pursue a code division multiple access (CDMA) network. Qualcomm, which owns several key patents involving CDMA technology, has been sweating out the techno-political drama in China, which at one point looked like it would ban CDMA and shut Qualcomm out entirely.
"What has changed is that there seemed to be no room in China for Qualcomm, and now there is room," says Pete Peterson, senior telecom analyst at Prudential Securities. "Up to this point, the world market had not been involved. Now with 3G networks, instead of everyone looking to Europe for direction, we are looking at a world technology [CDMA] sold to the world market. And the premier supplier of CDMA to new entrants has been Qualcomm."
With CDMA back in the picture in China, and billions of dollars at stake for Qualcomm, the prospects for the stock are looking good. Add to that a planned spin-off of its chip business, and two analyst upgrades since late July after a brutal eight-month sell-off, and there appears to be even more upside to come.
LIKE A SALMON
Remarkably, Qualcomm has been able to swim upstream while the Nasdaq has tanked. Perhaps more telling is specifically what some of Qualcomm's competitors have done during the same span.
Nokia (NYSE: NOK)'s shares have lost 10 percent since August 23, and that doesn't even include the 25 percent it lost the previous month. Meanwhile, poor Ericsson (Nasdaq: ERICY) was struggling with everything from weak handset sales to acts of God -- like a major fire in one of their suppliers' warehouses -- and chalked up a 23 percent loss over the same period.
Qualcomm's run-up, at a time when even positive news seems to trigger a sell-off, has more than a little to do with the fact that the stock lost 69 percent of its value during the preceding eight months following an astounding 2600 percent gain last year.
But thanks to the sell-off, Qualcomm, which is still by no means a cheap stock, is trading at a more reasonable valuation of 61.5 times 2001 earnings estimates, making it a much better bargain now than it had been late last year or earlier this year. And with more positive catalysts expected on the Asian front in the near future, Qualcomm's return to the investing limelight will probably last a lot longer than Charlie's Angels's box-office run. <<< |
