QCOM numbers:
fiscal year: GAAP EPS, pro forma EPS:
2002: 0.44, 0.98
2001:-0.73, 0.88
2000: 0.85, 1.01
In good years (2000), GAAP is fairly close to pro forma. In bad years (2001), Qualcomm's investments in speculative start-ups results in large losses, and impressive differences between GAAP and pro forma. 2002 was an in-between year. Cash flow shows the same thing: in a macro environment where weak companies are going bankrupt, Qualcomm goes cash-flow negative, as in 2001.
PE:
29, using FY03 pro forma EPS guess of 1.20 (and stock price of 35)
36, using FY02 pro forma EPS (just reported) of 0.98
80, using FYO2 GAAP EPS of 0.44
58, using my FY02 GAAP guess of 0.60
Quite a spread of valuations to choose from. Notice, the valuation you decide QCOM has, doesn't depend much on whether you use forward or trailing earnings. It depends mainly on whether you think GAAP or pro forma represents reality, and whether you think the losses in Strategic Investments (which causes the lower GAAP numbers) will continue in the future.
A PE of 80 is, IMO, clearly unsustainable. A PE around 30 is reasonable. I'm guessing that management's guess of $1.20 (pro forma) in 2003 is accurate, and that 2003 is like 2002, an "in-between" year, where GAAP is about half of pro forma. That is, I don't expect it to be nearly as bad as 2001, but also not nearly as good as 2000. Qualcomm still has significant equity and debt exposure to startups that could go the way of Globalstar, if the telecom sector doesn't revive in 2003. A PE of 58 is too high for me.
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Can someone explain to me what this statement from the 2001 annual report means:
"The diluted share base for fiscal 2001 excluded the potential dilutive effect of 51,188,000 incremental shares related to outstanding stock options, calculated using the treasury stock method, due to their anti-dilutive effect as a result of the Company’s loss before accounting change."
How can the effect of employee stock options be anti-dilutive?
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Disclosure: I am currently short QCOM at 36. |
