tekboy: Since you follow Qualcomm closely, you know who the rich janitor is and the quality of his posts. Here's one:
(For those uninterested in Qualcomm, it is long, suggest skip - except perhaps that the analysis is of some interest as an intellectual matter as a comparison to Synder's)
To: Ramsey Su who started this subject
From: mightylakers Tuesday, Jun 20, 2000 5:24 PM ET
Reply # of 12676
By TRJ on rocket board, must read
In the past six months I have seen my net worth drop by 40%. Due mainly in part to the fact that 2 of my 3 largest holdings (QCOM and MSFT), which represent 90% of my portfolio, have taken it on the chin. Not a pretty last six
months to say the least. I should be lucky with only a 40% loss because many of my friends (even on this board) have
been wiped out. Sure, there are some traders that make six figures a year playing momentum and hanging onto every bit
of news as though it could be earth shattering; but, to some that is lunch money. And the risks involved with playing these stakes does not justify the risk of losing huge portfolios that have taken years to build.
So, by accumulating stock during upswings and downswings, many have built solid portfolios. The 40% that I am down since January pales in comparison to the 800% gain that I have from a year ago and the 2000% gain that I have from 3 years ago. My point is NOT that I have great gains, but that I have great patience and I pick good long term stocks that will guarantee wealth if I:
a) understand their business and markets and,
b) learn to differentiate the truth from the BS
So, next, I guess I should answer two questions ?
1) If I knew QCOM would go down, should I have sold? Ah, yes.
2) What is the outlook for QCOM today? OK, nothing I haven?t said before, but let me some it up in my next few posts.
Before I do I want to say that I understand how emotional money makes people and I understand how important the short term is to many of us. Especially the people who bought QCOM and are currently in the red. What I don?t understand is how people can become so negative about events that have nothing to do with the long term price or outlook of a company. The two reasons that I have been absent from this board are that it depresses me to read nonevent posts treated as if the world had ended. People won?t like to hear this, but regardless of what people think, people on this board and others are partly guilty for QCOM decline by making huge issues out of small ones. Of course that is just an opinion. I am a firm believer that the media loves to fuel fire. In any event, none of it really matters because at the end of the day, a stock is valued by earnings and earnings growth.
The second reason that I have been absent is that I have been spending a great deal of time overseas. This is not because CDMA is slowing down, by the way?
This will lead to me into my next post ?
First a little background:
Last August a brilliant analyst named Ed Snyder had year 2000 EPS for QCOM at $.60. In November, 3 months later, he raised his 2000 estimate by 23% to a figure of $.73 and stated that QCOM should only see 13% earnings growth over the next three years. During the time of this report, QCOM was trading at $66 (split adjusted). Based on a $.73 year 2000 earnings, Q was at $66, $3 ahead of where it is today. Now it gets fun:
In December, this brilliant analyst raised his year 2000 estimate 35% to $.97. Now, three months earlier he had stated that QCOM would see 13% growth in three years, but his estimate for one year increased 35% in three MONTHS. Interesting to say the least. In April, he raised his 2000 estimate another 13% to $1.11. ? So in 8 months, QCOM?s 2000 estimate has increased by 71%? Now, it really gets interesting?????
If QCOM were to meet the analysts $1.11 estimate, that would mean that QCOM?s 2000 P/E is 57. Assuming continued 50% growth per year would make 2001 estimates about $1.67or a forward P/E of 38.
Now since November, when we were last trading in the 60s, what negatives have happened? A deal with China Unicom which opened up the doors of China to CDMA has come and been questioned. South Korea, QCOM?s slowest growing market has for the second time in 12 months declared that handset subsidies would be suspended. All QCOM competitors updated their competitive chip press releases with new dates (lol). 18 companies and many carriers have signed HDR agreements. QCOM shed it?s non profitable handset division. Shipped her 100Mth MSM chip, introduced new chips with added functionality, announced new carrier rollouts in Australia, Asia and South America, moved up dates for 1XRTT and HDR trials, signed 7 new licensee deals bring current list over 50 big name companies, and 14 months ago, experts predicted that CDMA subscribers would reach 40M by March of 2000. The downside was that QCOM competitors would reduce their ASIC share to 50%. BUT in actuality in March of 2000, CDMA subs had grown to 57M and QCOM retained an 85-90% ASIC share. Nokia president predict that replacement phones will grow at a rate of 40% a year from 2000 onward and experts now predict a total of 80M CDMA subs by the end of 2000 (60% yearly growth). All this positive news DOES NOT include two very important factors:
1. New market such as China and India
1. ASIC sales and royalties for WCDMA
That?s right - 50% growth a year for the next five years does not include these items! If China announced tomorrow that they would never use CDMA (won?t happen) and Nokia found a way to make 3G CDMA with no QCOM patents (impossible) , we would still be holding shares of a company that will grow 50% a year! Nothing has changed in
the last six month from the original QCOM story.
Here are some comparisons:
BRCM = $169, 2000 EPS= .81, 2001 EPS = 1.17, growth = 4% 00 P/E = 200, 01 P/E= 140
CSCO = $67, 2000 EPS = .54, 2001 EPS = .70, growth = 30% 00 P/E = 120, 2001 EPS = 98
JDSU = $124, 2000 EPS = .42, 2001 EPS = .61, growth = 40% 00 P/E = 290, 2001 P/E = 200
QCOM = $63, 2000 EPS = 1.11, 2001 EPS = .1.42, growth = 50% 00 P/E = 58, 01 P/E = 42
Compare by industry? QCOM took a beating when it announced in January that Q1 earnings would be flat as a result of seasonal factors. MOT and NOK earnings decreased during this quarter, but QCOM actually increased earnings a .01.
Typically for QCOM, it will work like this:
Q1 ? 15-20% increase over previous quarter
Q2 ? Flat
Q3 ? 10% increase
Q4 ? 20-25% increase
That is the nature of the wireless market. Most phone sales in November and December means most Chips order in August and September.
So what does all this Janitorial rambling mean? Be patient and if you are a long term holder, only monitor the events that effect the core business. Such as CDMA sub growth, ASIC sales and wireless growth, in general. Any other news that drives the price down, only provides you with a buying opportunity. At the end of the day, earnings and growth are all that matter.
JMHO,
TRJ |
