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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: waverider who wrote (71081)	4/22/2000 1:30:00 PM
From: waverider	Read Replies (2) \| Respond to of 152472

Part two from Rich: Yes, cheap. We agree that our growth rate on the facts alone is greater than 50% a year for several years to come and more. Using Year 2000 EPS, our P/E is under 100. CSCO is allowed to trade at a 140 P/E with only 30% growth a year. Cisco has earnings of 3x more than QCOM, yet a market cap 6x more than QCOM. Additionally, QCOM earnings are growing at a much faster pace than CSCO earnings were two years ago. So how do you value QCOM? Compared to CSCO and other high flyers, QCOM is cheap at current multiples. ESPECIALLY considering their sustainable high EPS growth rate. Well, even QCOM's biggest adversaries iun the finicial world admit that QCOM will earn $1B in royalties in 2001. Conservative estimates also predict 100M ASICs in 2001. This means that QCOM will earn between $2.2 - 2.5B in 2001. So, if our 2001 P/E is < 50 and our growth rate is 50%/year, what should today's value reflect? Easy: With 50% sustainable growth per year, you have to use a fwd year P/E of 100+. 4/2000 = $145/shr 1/2001 = $250/shr 1/2002 = $425/shr Now the question of added value comes into play. Considering the following scenarios, what added value, in terms of percentage gain, does each contribute to QCOM's stock price: 1. China 2. Q selling WCDMA chipset 3. Q recieves royalty for WCDMA phones made (we already know this is fact, but don't know exact amount. 4. Nokia buys MSMs or licenses MSM core technology. 5. AT&T invests in a CDMA network 6. More countries deploy CDMA networks 7. Today's wired devices go wireless (internet, etc.) My point is that QCOM has a value based on typical CDMA growth. This is a very low risk earnings path that today is undervalued. It has a different value based on all the potential positive changes that can effect its revenue, earnings, and market share in the future. Either way, you would be hardpressed to find investment opportunities with so little risk and so much upside. All JMO, - TRJ