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

To: Jim Mullens who wrote (125943)	12/10/2002 3:07:47 AM
From: hueyone	Read Replies (1) \| Respond to of 152472

Qualcomm closed at $41.22 on Friday, with 2003 company guidance at $1.175 (conservative) yielding a PE of 35, not “40” as you state. Imo, the "E" in PEs traditionally refers to trailing twelve month (ttm) GAAP earnings unless otherwise specified. Trailing twelve month earnings for QCOM are 44 cents per share. That is why if one clicks on Multex, Quicken, or Yahoo Finance for QCOM, it will report a 94 PE for QCOM---(although Yahoo also has another section that reports ttm PEs based on trailing pro forma earnings). This 94 PE was based on Friday's closing price and had not been updated to Monday's closing price yet at the time I wrote this post. yahoo.marketguide.com quicken.com finance.yahoo.com Value Line shows the DJIA companies for the last 10 years (ending 2000) with a average PE of 17.4 and earnings growth rate of 9.7% which yields a PEG of 1.8 Are not your reported Value Line PEs based on trailing twelve month GAAP earnings as well? Best, Huey

To: Jim Mullens who wrote (125943)	12/10/2002 8:39:01 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

you seem to be under the impression that PEG is a real metric. it's not. it was made up in the bubble years to justify ridiculous PEs. since the earnings growth used for PEG is a fantasy number made up by analysts who are notorious for their poor ability to predict future earnings growth, it follows that PEG is a fantasy number. in fact, when one uses a PE based on next year's pro forma "earnings", that number is also a fantasy, so the resulting "pro forma PEG based on next year's pro forma PE fantasy" is a double fantasy. and of course there's an even better reason PEG is full of crap: people only use it when they anticipate an abnormally high earnings year (to justify an abnormally high PE). but when the earnings inevitably regress to trend (as they have in the case of QCOM thanks to three years of stagnating earnings, which no QCOM analyst predicted, thus leaving the PEG believers in QCOM out on a $1000-price-target limb in late 99), but then ignore all the zero-growth years in between. this misguided extrapolation of just the positive data points is a form of data mining, and is a reliable path to confusion.

To: Jim Mullens who wrote (125943)	12/10/2002 9:27:22 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

(PE 13.4, earnings growth 7.3%, PEG 1.83). For the past 50 years (PE 12.7, earnings growth 5.7%, PEG 2.2). I these are historical numbers. that is, ttm PEs, and historical earnings growth rates. in contrast, when you look at QCOM, you use forward pro forma PEs, and rely on forward analyst consensus estimates of earnings/handset growth, which are almost always laughably wrong. i think it would be better to look at QCOM's PE as being around 40 (and even this is incredibly generous because it is based on their pro forma fantasy, as opposed to the harsh reality of the GAAP and S&P core earnings), and its growth as around 6% long term (you need to average in all the zero-growth years, like the last three). this puts its PEG at about 6.6666. do you still like the PEG? more importantly, you should learn from this example that a figure such as PEG is extremely easy to manipulate. your own low PEG for QCOM is entirely dependent on accepting their pro forma numbers as "real earnings", and the belief that QCOM will somehow achieve some crazy long term earnings growth like 35%. i would mention again that Warren Buffett thinks almost no S&P500 cos will achieve 15% compound earnings growth over the next decade, and that it's impossible to predict which small handful of cos may be lucky to achieve even that rate. you, on the other hand, are assuming more than twice the long term growth rate that the world's greatest investor thinks is nearly impossible. didn't you notice that earnings went nowhere the last three years even as CDMA was supposedly taking over the world? as for your 35% target, all i can say is: Good Luck!

To: Jim Mullens who wrote (125943)	12/11/2002 1:32:37 AM
From: Stock Farmer	Read Replies (3) \| Respond to of 152472

Astounding... simply astounding... I am trying to clue you in to inconsistencies in your logic and you persist on writing back to me about "comprehension"... I'll try to make this very simple. I questioned your view of a PE of 64 for Qualcomm in '07 as dubious. I cited the current PE of "about 40". And you "corrected" me by pointing out the current PE is more exactly 35. Why stop at two decimal places? Why not go to four? Whatever. You say PE is 35. Take it as fact. You say PE will be 64 in the next 5 years. So according to you, Qualcomm's PE is going to go up over the next 5 years. By nearly two. Plus or minus 20%. I'm not having trouble comprehending what you are writing Jim. I just have difficulty believing it. There's a big difference. Comprende? John