hi Apollo,
re: QCOM,
My expectations aren't that high.
I hope to hold until 2010, with minimal gains of 10X.
let's do a little math here. QCOM's current runrate earnings are $0.84 pro-forma, which works out to a PE of 71 at a share price of $60. let's say QCOM goes to $600 in nine years (2010), while the PE declines to 25 as QCOM matures as a company. QCOM's earnings would then have to be 600/25 or $24 a share. so earnings need to increase from pro forma 84 cents to $24 in the space of ten years--an increase of 28.5 times, or around 45% CAGR in earnings per share for 9 years.
let us further assume shares outstanding grow at CAGR of 3% from the current 764.4MM--in 2010 they would have 997.4MM shares, which multiplied by $24 eps equals total earnings of nearly $24 billion dollars a year.
if handset sales increase from 400MM units per year at 10% CAGR up to 2010, which seems insanely optimistic to me, then handset sales in 2010 would be 943MM units. QCOM would need to collect $25.45 PER HANDSET IN PROFITS, off of nearly 1 BILLION HANDSETS, in order to achieve the above earnings target in 2010. assuming incredibly generous net margins of 25%, QCOM would need gross sales of nearly $100 Billion, or about $100 on each handset sold.
so, exactly how is it that you expect the share price to reach $600? |
