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

To: pyslent who wrote (110134)	1/2/2002 5:05:39 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

QCOM investors are willing to pay a premium for the shares relative to its earning is because they EXPECT to be paid a $5/sh dividend in the near future. or at least have $5/sh company profits with which to generate good ROI for shareholders i doubt this will happen, but that is not really the point. the point is, $5 is what needs to happen imo, and that is a heckuva long way from 80 cents runrate for a company that hasn't grown its pro forma "earnings" in 2 yrs. (BTW, i think you are fairly unique among qcom fans in recognizing that this kind of future earnings performance is built into the current stock price.) going from 80 cents to $5 in three years is about 85% CAGR in eps...and of course, that's not $5 of dividends--it's just $5 of pro forma "earnings". let's say that they have an incredible run from .80 to $5 in the next three years, and then shift gears down to the mature market growth rate. then what? even if they made $5 pro forma, and assuming a standard S&P 500 payout ratio of 28%, that is $1.40 dividend (2.8% dividend yield if the stock stayed at today's price of $50), not $5 (they can put the rest of the money back in the business). if qcom had "earnings" of $5 and paid a $1.40 div as per above, then the stock would be worth $87.50 if it were in line with the market dividend yield (assuming the S&P div yield remains at these historically low levels)...in three years, assuming 85% CAGR. if QCOM paid a historical avg div yield of 4% w/historical avg 45% payout ratio, then the stock would be at $56.25...again in three years, assuming 85% CAGR. of course, there is the small matter of just how likely qcom is to more than sextuple their earnings in three years, so as to justify a share price just several dollars above today's price in three years. matching the expected avg yield from a money market fund i'm not sure the dividend yield is intended to match the MMFs. while today's MMFs are low (a little under 2%), a year ago they were closer to 6%, but the dividend yield was about where it is today (1.6%). Of course, while Mucho seems to think that that is a ridiculous earnings target, I would not be surprised to exceed that substantially. i do think 85% CAGR for the next three years is highly unlikely, but even if it happens, i don't see what the upside is in the stock (from a fundamental viewpoint, of course; from a speculative viewpoint, all sorts of things could happen on the yellow brick road to five-dollah-land). just how much better than this do you expect them to do?

To: pyslent who wrote (110134)	1/2/2002 6:21:12 PM
From: rharshman	Read Replies (1) \| Respond to of 152472

With all the handwringing on this board, it is refreshing to read such an optimistic view. While I hope you are right, $5 earnings in such a short time would be so spectacular that it would probably also produce a sharp increase in the PE, and one could produce quite a price projection from that combination. We all recognize, I think, that earnings growth must materialize for us to prosper as investors. My own view, and it may be overly optimistic is that we should start to see fairly consistent growth in the 30% range and that would produce earnings of over $2.00 three years from now. That sort of earnings growth in a reasonably healthy market environment could justify a 60 PE. and a valuation three years out of about 120, not an unattractive prospect. One can come up with any predictive scenario, depending on what one thinks of earnings prospects.