CDMA, Qualcomm, [Hong Kong, Korea, LA] THE MARKET TEST! Message Board

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Technology Stocks : CDMA, Qualcomm, [Hong Kong, Korea, LA] THE MARKET TEST!

QCOM 174.68

+0.3%

3:36 PM EST

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To: Chris Reeder who wrote (1395)	1/1/1997 2:24:00 PM
From: kech	of 1819

Hi Chris - No question the industry is growing fast and that there are a lot of uncertainties. Maybe people underestimated growth for cellular and fiber and maybe telecom industry growth is overestimated now. Despite these uncertainties it is still interesting to speculate on what is the appropriate multiple or p/e for Qualcomm's anticipated 1997 earnings of $1.20 and the 1998 earnings of $2.36. Najeev pointed out that with a price of 40 it is sporting a 30X multiple of '97 earnings and since other companies in the industry have a multiple like this then QCOM is currently fairly valued for the next year. But if firms in the industry are roughly valued at 30X, my only point was that I doubt if the average firm in this sample is expected to grow at 100% between '97 and '98 as Lehman forecasts for QCOM. Now we can't say that this 100% growth will continue say from '98 to '99 so let's discount the growth rate. Conservatively, I would suggest a 30x multiple for '98 earnings which puts QCOM at 70 in '98. Accordingly, with a company expected to grow so rapidly, I would suggest a 40X -50X multiple for 97 earnings, which would value QCOM somewhere between 48 and 60 in '97. With this in mind, I bought some more yesterday. Maybe it will tank when first quarter earnings are announced at .10 Jan. 23. But Sprint has already pointed out that they will be back on track with their 65 markets by mid-way '97 so '97 earnings are still on target at $1.20. It shouldn't stay down for long. Then again, maybe Tim Luke's (Lehman's) numbers are overoptimistic...

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