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

To: Wyätt Gwyön who wrote (116096)	3/27/2002 7:43:19 PM
From: Rocket Scientist	Read Replies (1) \| Respond to of 152472

Sorry, I'm not following your math. By "QCOM NPV" do you mean NPV of the forecasted earnings stream? If I understand your scenarios correctly, NPV of Case 1 (13% discount rate, eps growth 30%X5yrs+15%X5yrs+6%X20yrs) is about 43$, if we start at 1$/share earnings in the first year But this does not take into account any perpetuity factor for the company (i.e. the QCOM s/h gets not just the company's earnings over the 30year (or whatever) but retains ownership of the underlying earnings generator) To take your admittedly "wildly bullish" scenario, the lucky QCOM s/h will still own at the end of ten years, a security producing $7.50 per share in earnings (or 187$ per 1K$ invested today at 40$ per share) plus his share of Q's retained earnings during the period would amount to over 41$ per share. A person who buys a 10year, 6% bond today will have collected (and paid taxes on) 791$ in interest, gotten his principal back, and be looking around for another bond to buy. None of these figures is discounted, of course.

To: Wyätt Gwyön who wrote (116096)	3/27/2002 7:45:37 PM
From: sag	Read Replies (2) \| Respond to of 152472

<if i assume less stratospheric growth, such as 15% CAGR for a decade, which is still in the top 1% according to Buffett, and if i then assume only a 5% discount rate (which is less than a 10yr bond), i calculate NPV at 36.75.> Using Quicken, I started with 2001 pro forma earnings of $790 million and let the software do the rest. If we assume initial earnings of $790 million grow at a rate of 15.00%, and we discount those future earnings at a rate of 5.00%, we arrive at a net present value for the company's next 10 years of earnings of $13.5 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $34.7 billion. To complete the calculation we add these two figures together, subtract the long-term debt for QCOM ($0), and divide by the outstanding shares (767 million) to get a per share intrinsic value of $62.75. Perhaps something more realistic? If we assume initial earnings of $790 million grow at a rate of 25.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $12.9 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $32.1 billion. To complete the calculation we add these two figures together, subtract the long-term debt for QCOM ($0), and divide by the outstanding shares (767 million) to get a per share intrinsic value of $58.64.