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: Jim Mullens who wrote (125925)	12/9/2002 10:51:22 AM
From: Stock Farmer	Read Replies (1) of 152472

Yes. Too simplistic. Tossing about PEG as a valuation metric was the kind of "neuveau math" that underpinned the bubble. Feel free to go there if you like, but it's thinking more associated with H Bradley Toland Jr.'s 'Crazies' than savvy investors. Doesn't take much to plug 3.97 x PEG of 1.8 x Growth of 35% into a calculator. Or maybe look in a big table of logarithms if that's all they have. But the real work goes into justifying the numbers in the first place. It's lots of fun picking apart inconsistent assumptions. Like this: handset growth CAGR at 50% for next 6 years and taper the growth rate down to 25% for the following 4 years. What's the last number in that series, about 2 Billion handsets per year? How does this compare to world-wide consumption of wrist-watches? Toothbrushes? This is the 2012 context in which we would examine: 2007- $3.97/share EPS x 64 PE (35% LT growth* x 1.8 PEG) = $254/ share* How much REAL growth does someone see looking forward from 2007 then? Why did you pick a long-term growth rate of 35% in 2007? Doesn't even 25% give rise to something rather unsustainable over an interval that isn't exactly "long term"? 2007- $3.97/share EPS x 64 PE (35% LT growth x 1.8 PEG) = $254/ share And then there's this mysterious PEG. Why did you choose 1.8? Even during the bubble PEG of 1 was used to justify overinflated prices. Are you suggesting Bubble, Mark II? It doesn't even stand a lunatic test against today's valuation: 2007- $3.97/share EPS x 64 PE* (35% LT growth x 1.8 PEG) = $254/ share* Currently the stock is trading at around 40x "earnings". This multiple anticipates considerable growth from here - like 5x after 5 years. Do you think that the growth potential will be higher in 2007? If not, then why choose a multiple of 64x, even times higher than the stock currently trades at? There are a bunch of folk out there hoping that a greater fool will come along and take their shares off them for a crazier price than they got conned into paying. Stuff like that is what gives 'em hope. John

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