Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 174.01

-0.3%

Nov 14 9:30 AM EST

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To: Stock Farmer who wrote (125903)	12/7/2002 1:59:58 PM
From: Jim Mullens	Read Replies (1) of 152472

John, you wrote- >>>”) to get a fair value of about 17-18 bucks per share in 2002 dollars.”<<< This may be a too simplistic approach, but I’m already considered a simpleton by some (many?) so here goes. Assumptions- 1. 2003 EPS of $ 1.20/share (probably low) 2. CDMA/CDMA2000/WCDMA and MSM6300 (GSM/GPRS-CDMA2000 1X) handset growth CAGR at 50% for next 6 years and taper the growth rate down to 25% for the following 4 years. 3. Use a 35% LT (3-5yr) growth rate (conservative) to off-set ASP declines, share increases due to options (share buy back could off-set this). 35% could be low if ramp in volume results in higher net margin rates. Also, R&D expenditures could decrease as the engineering staff retires. 4. Use a PE rate of 64 (35% LT growth X 1.8 PEG) in 2007 based on a return to a normal market environment and a 5.5% long bond. 2003- $1.20/ share EPS 2004- $1.62 2005- $2.18 2006- $2.94 2007- $3.97/share EPS x 64 PE (35% LT growth x 1.8 PEG) = $254/ share Discount the $254/share using a Present Worth table from an o l d text book at 3% (estimated annual inflation rate) for 5 years (.8626088) yields a 2002 present value of $219 for the $254 share price in 2007. This scenario is based only on current business operations, basically handset sales. BREW revenue, and all of the other aforementioned potential revenue sources (which could be huge) are excluded. Also excluded are potential investment returns from the additions to accumulated cash resulting from the significant cash flow generated over the period. Hope this helps- Jim

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