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Wednesday, November 7, 2012

QCOM = awesome

Better than expected quarter numbers. Better than expected Q1 2013 guidance, which brings QCOM to an accelerating earnings growth from a flat to contracting earnings story for the quarter.

I will update this post tonight with numbers, but the story is very much intact. The best part is that the big-boys have to readjust their models , and their automated programs will flash "buy" or "cheap". What ever we call it, the stock will be given a higher multiple.

Update:

Today's severe decline should not have happened, but it did. The magnitude was most likely exaggerated because the Nasdaq started breaking some key moving average supports, and of course Apple's decline.


A pure technician poops their pants, and sells. A person who understands the magnitude of a 42% year-over-year smartphone growth, and a projected 1B to 5B unit growth, understands QCOM should be in the 70s not 50s!!! In-turn, QCOM exceeded expectation and analyst guidance by 16%.

Before the manufacturing issue, which looks to have gotten alleviated, QCOM's low-end trailing PE was 19. It would only go below 19ish during recessions. There will NOT be a recession in smartphone/tablet growth.  A very reasonable assumption is that QCOM should, at the very least, start to trade at its old low-end multiple of 19-20.

QCOM will have a trailing EPS of 3.51 (GAAP). Slap a 19 multiple, and we get a stock price of 66. Looking forward, as the holiday season progresses, QCOM will merit a higher stock price, thanks to accelerated earnings. The trailing eps will approach 3.68, which will lead to a stock price of 70 with a multiple of 19.

Of course, I am only assuming the low-end estimate. But doesn't a stock, knee-deep in a sector growing in multiples, deserve a higher multiple?

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