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

To: SKIP PAUL who wrote (123849)	9/8/2002 12:37:03 PM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 152472

dont think anyone gives a damn whether you are long or short or what your price projections are unless they are accompanied with some arguments supporting your position. then i wonder why anybody is long. isn't everybody expecting to beat the historical market return? do you realize that to beat the market over time you need to have high expected returns? do you realize that high returns in the future require a low valuation today? i add these factors together, put numbers to them, and it is VERY VERY easy for me to "project" a lower forward price for this stock. i put the word project in quotes because it is dependent on exogenous factors. specifically, speculative factors which are outside the simpler calculation of expected return from earnings yield. i.e., a lower "projected" price is dependent on investors devaluing stocks to the point where they are worth buying again (imo). that is, lowering them to the point where you could expect a 7% real return. this requires a PE of around 14. which may or may not happen, as there is the theoretical possibility that stocks have reached a "permanently high plateau", as the eminent Irving Fisher put it in 1929 (of course, he was famously and fabulously wrong, but maybe this time we'll get lucky -g-). so where is QCOM's PE? even if i am exceedingly generous and accept their pro forma numbers at face value, they are making less than a dollar this year. say 95 cents. divided by the Friday close, that works out to a PE of around 30. not as bad as much of the trash in the Nasdaq, but a recipe for high forward returns into the distant future i think not. of course, all the people waiting for Godot think QCOM is going to have a smashing good year next year, or the next, or the next...just like they have been saying for the past several years. so perhaps their earnings will jump up to $1.30 before they flatten out again for another stretch. but $1.30 is still a PE of around 22, which works out to an earnings yield of 4.55%. how does a real return of 4.55% sound? that is more than 200 basis points below the historical market return of the past 100 years, and assumes QCOM is already making $1.30 of real money per share! the best i can say, speaking in general terms, for a stock with a 30 PE, is that the forward expected real return would be around 3%, over a long enough period of time. given that QCOM further dilutes itself with lots of options, i would probably hack some more off that return, and given that the earnings are pro forma in the first place (as they were in the previous quarter, and the one before that, and the one before that...), i would probably hack even more off. all in all, i would expect about a 1.5% forward return off of this stock--about on par with money markets (and i would of course raise that estimated amount accordingly if they suddenly start making 35% more money than in the past). of course, i'm talking about over a long period of time, like 20 or 30 years, to take out the volatility. in the meantime, perhaps there will be opportunities for all the people who think they are great market timers to sell the stock at a 20/30/50/etc. percent profit. just as there has been up to now. otoh, there have also been many opportunities for people to sell at losses. in fact, somebody who bought the stock the morning of jan 3, 2000 has had that opportunity every single trading day since then. one question worth asking, i think, is if one believes expected returns are below the historical average, then what are the probabilities of having profitable selling opportunities versus unprofitable? that is no exact science, to be sure (just ask anybody who shorted QCOM at 400 a few weeks before it went to 800; they would have a 71.5% profit if they'd held till Friday, but would have suffered a 100% paper loss in the interim). but over a long enough period of time, i believe the probability dispersion will generally be skewed towards regressing to the valuation mean. if this stock were around $8-10, i would be fairly confident that it would beat the historical market return over a long enough period of time, in spite of the management and QCOM's option program which dilutes shareholders. but even if the stock falls that low, if i had bought at 28.46, i would expect a 1-1.5% return if i held the stock long enough. like 30 or 40 years, assuming it still exists then. of course, i'd rather wait till it falls further, so that i could expect a return well above the money market rate. all jmho and i could be wrong.

To: SKIP PAUL who wrote (123849)	9/9/2002 8:46:32 AM
From: chojiro	Read Replies (1) \| Respond to of 152472

I dont think anyone gives a damn whether you are long or short or what your price projections are unless they are accompanied with some arguments supporting your position. SKIP, my supporting argument has not changed since I first started posting here over a year ago. The stock is grossly over valued(TTM PE of 200+). I believe pro forma reporting is nothing more than smoke and mirrors. I further believe that future growth estimates will eventually be ratcheted down in coming months giving it an even greater PEG.