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

To: pyslent who wrote (111878)	1/30/2002 7:52:01 AM
From: kech	Read Replies (1) \| Respond to of 152472

That is great analysis pyslent - $125 in 2006. And that is roughly the same p/e in 2006 as coca-cola sports today --about 27. And they are really quite similar - both are sure things, franchises, no competition, no ongoing huge capital investments required to maintain the cash flow. Coke is only growing about 10% per year, but it is very certain. What makes the analysis interesting is that if Q is worth $125 in 2006, what is it worth at 2005? Would you pay $110? How about in 2004 - maybe $95? How about 2003 - maybe about $85? And in 2002 lets say $75. The Q, a Buffet stock for the 21st century! Gee- LTBH looks like fun again. Of course it could just stay at $43 until 2005 and then zoom to $125. But that is ok if you plan to wait until 2006 anyway.

To: pyslent who wrote (111878)	1/30/2002 9:11:21 AM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 152472

it is interesting to see how different methods produce very different results. So while revenue may only reach ~9B, operating margins should approach 50%. i think that may be a bit ambitious. MSFT, for instance, only has operating margins of about 40%. QCOM may have a great business model, but it ain't no Microsoft. i would consider 30% margins to be an excellent figure to shoot for. if you run the calculation i presented in my last post assuming 30% margins, the dollars per handset is still quite high ($36.58). but in any case, i guess we will see the reality, whatever it is, unfold over time. Incidentally, how does your DCF/valuation model price QCOM's NPV if it should grow from $1 eps to $5 eps by 2006 (I think that works out to a CAGR of 40% over 4 years)? i really want to assume some sort of market-beating growth figures out to 10 years, since it is posited that QCOM should have stellar growth for that period. so if i assume 40% CAGR for years 1-4 and 20% CAGR for years 5-10, with an expected return of 13%, then i calculate NPV at around $35. if expected return is lowered to 11% in this scenario, then i calculate QCOM is at NPV now. however, i would state that i think both 11% and 13% are too low as expected returns if i am to assume the incredibly high 40/20 growth scenario. all JMHO. good luck!

To: pyslent who wrote (111878)	1/30/2002 12:42:49 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 152472

psylent - Now that I've fully accepted pro-forma dollars (ok, maybe not, but let's drop that for a while), the next most significant quibble with such excellent logic hinges mostly on the assumptions. GIGO and all that. In particular, the key "500 M phones per year in 2006" assumption. From this assumption you demonstrate we could see 30% annual return on investment. I'd sign up for that. But here Message 16982922 we see that 500 M is one person's estimate of the total market. Betting that Q gets a 90% margin on 100% of the forecast market is a smidge more optimistic than I find comfortable. What if we take the article's view that 35% is forecast to head Q's way? Which winds its way through the multiplication signs in your logic to give 35% * 125 = $44 p.s. in 2006. Pretty close to 0.00% CAGR from here. That's another also legitimate view. If we ratchet up Q's share to 44% we get $55.50 in 2006, for a rate of return to shareholders of 6%, just squeezing out what I'm getting on my pile of risk free government bonds. Then a fourth perspective. I wouldn't send someone to the asylum just for contemplating that GSM actually picks up or at least maintains market traction in a kind of son of VHS kind of way. There are quite a few conceivable alternate futures in which 35% to Q is way too high, and 0.00 CAGR would look quite nice in comparison to what we might get. So in juxtaposition to the rather good looking 30% rate of return you initially posited, there are legitimate alternative scenarios. Differing only in one key wet-finger estimated number. And which speak to a return rather substantially less than staying in bonds. Or, if you put a price on risk as some people do, a substantially lower return than a zero interest checking account. Not exactly the stuff that would suck the cash from the sidelines. Thinking along these lines might actually trigger a kind of reverse effect. Or maybe that's what's been happening? Food for thought. John