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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: kech who wrote (28622)	11/8/2002 8:41:07 AM
From: quidditch	Respond to of 196722

GS's view this morning--balanced, if a bit tempered (remember guys, we have analysts in a cya mode after all the (appropriate) bashing they have received): <QUALCOMM, Inc. [QCOM] $34.94 QCOM (OP) reports strong FYQ4 results and outlook EPS (FY Sep): 2003E US$1.17, 2004E US$ - Outperform * QCOM (OP/C) reported strong FQ4 results with revs up 16% seq and $0.02 EPS upside. Guidance was for revs to be up at least 15% seq with EPS of $0.35-$0.38, $0.06 above consensus. QCOM is > 90% booked for 25-27M MSM chipsets, up from 20M in Q3, likely driven by strength in China, market share losses for NOK and MOT's 1x ramp. Although there are mixed datapts on sell-through and there appears to be pockets of inventory, we are able to raise our F03 ests while still modeling for a much steeper than expected 19% seq Mar qtr decline and conservative 2HF03 ests. We are raising our F03 ests from $3.2B and $1.10 to $3.4B and $1.17. Expect analyst meeting to shed more light on 2003 assumptions and to highlight strong product and technology momentum in multi-mode applications. We believe QCOM's impressive growth and intermediate term outlook should enable it to continue to outperform its peers even if it remains volatile with the newsflow in the near-term. The stock trades at 30x our F03 EPS estimates and we reiterate our OP/C rating. * BUCKLE UP, COULD BE A BUMPY RIDE THROUGH THE HOLIDAYS Despite delivering impressive growth over the last several quarters and guiding to, what two qtrs ago would have been unthinkable Dec qtr expectations, skepticism is unlikely to wane in the near-term as mixed sell-through datapts combined with inventory concerns will likely keep investors from being fully convinced about the higher expectations. That said, we believe it is too early to tell what handset sales will look like this qtr and further just how significant the drop-off will be in March. The company highlighted that it is over 90% booked for the current qtr chipset assumptions and already has good backlog for March that should be at least as high as September qtr shipments of 20M. For F03, the company indicated it believed 100-105M handsets would be sold although it will give more color on its assumptions at its analyst meeting next week. We are raising our handset forecasts for CY03 from 90M to 97M as a result of stronger sales to China. Further, the guidance for F03 of $1.15 to $1.20 is essentially in-line with prior ests discounting the significant $0.06 improvement over prior Dec qtr expectations. * MAINTAIN OUTPERFORM, VALUATION REASONABLE COMPARED TO PEERS While not inexpensive at 30x F'03 ests, we are now forecasting 18% growth in F'03 while including a steeper than normal 19% decline in March qtr on 19M chipsets, due to seasonality / inventory burn off. We would be buying the stock on dips although it is unlikely to fully break away in either direction until more data on handset sales comes through. With sell-in data for component suppliers in both wireless and PCs likely causing some of the near-term rally in semis we believe sell-through data for the holidays across an array of end markets will be key not only for QCOM but also for the market. We maintain our coverage outperform rating despite the uncertainties since the impact of weaker sell-through is to some degree embedded in our out quarter numbers. Further, while some might say QCOM is expensive we would argue that QCOM, with impressive near-term fundamentals, margins and growth prospects over the next several years should trade at a premium to other large cap semi stocks such as TXN (NC) at 79x, and INTC (NC) at 36x forward 12-month consensus EPS, which are currently trading at a premium to QCOM. Interestingly even DELL (NC), with lower margins and growth prospects is trading at 30x C03 consensus EPS.> quid