| | | Bife, thanks for posting George’s Citi transcript.
I found these snips (see way below) on the share repurchase interesting, especially relating to the price at which the program would slow down / take a pause.
Citi- I guess the best problem to have would be, is there a price where the stock goes high enough to where you would slow down or change the buyback?
George D- I would love to be having an active debate on that question.
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So, what was George implying by the above, and the fact that only half of the tender offer was completed? Perhaps--- the market already senses that QCOM is vastly undervalued and too sudden share appreciation would indicate achieving even a $4.50- $4.75 FY19 EPS without an AAPL settlement before year-end could drive the price above their upper $/sh limit ($80).
Thus, why the need to continue the buy back (-- the active debate question)
Now, the Macquarie analyst Srini Pajjuri sees an $8.50 FY20 EPS with the AAPL settlement. So, even with only one half of the repurchase completed ~96 cents ($5.50 – $3.58 = $1.92 X .5 = $0.96), with an AAPL settlement we’re potentially looking at ~ $6 EPS in FY19, and ~$7.50 in FY20 per Macquarie’s analysis. (7.50 X 19 = $142, X 15 = $112)
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iShares PHLX Semiconductor ETF- SOXX trailing PE- 19.58
QCOM
...........................................................EPS.......PE.........$/sh
Current FY 18......................................$3.58.....19.55......$70
FY 19
QCOM plan w/o AAPL settlement.......$5.50.......19........$104
..............................................................5.00.......19.........$ 95
..............................................................4.75.......19.........$ 90
..............................................................4.50.......19.........$ 85
..............................................................4.25.......19.........$ 81
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G Davis
+ Obviously, the biggest difference today from then is time. And so, if you look at the ability to impact 2019 earnings with share repurchase, like I said, we’re committed to largely getting the share repurchase in 2019. And so, on a pro forma basis, it's going to be quite attractive. Whether you can get it – you're not going to – being able to get to the $1.50 in 2019 based on just the sheer fact of time is going to be problematic
+ Christopher Danely
Yeah. So, just go through, if you could, how much is remaining on the buyback?
George Davis
$25 billion.
Christopher Danely
And then, what is – does this change your accretion statistics given the stock has gone up?
George Davis
It’s going to change it from a in-year just – but the stock assumptions – you have to make assumptions about how prices can react anyway. I think I feel very good about the accretion opportunity that's going to come out of the share purchase. We’re buying back between 25% and 30% of the shares of the company. It will take more than a year, but we can get most – a large majority of it done in the year. And we think that's coupled with progress on our performance in the markets and resolution of some of these items. It's an attractive set of facts to think about.
Christopher Danely
Yeah. I guess the best problem to have would be, is there a price where the stock goes high enough to where you would slow down or change the buyback?
George Davis
I would love to be having an active debate on that question.
Christopher Danely
I think we’re right now. [indiscernible].
George Davis
No, we’re not there.
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