(QCOM) Reports Quarterly Results Tonight with an earnings
call at 4:45 EDT today. We rate Qualcomm a Medium Term Buy
based on having over 70% upside to our 12
month target price of $100. That target is based on earnings of $5.78 for calendar 2018 using a historical 17X price
earnings ratio (P/E).
We are at $.87 for this quarter versus the street's $.83. For next quarter we're at $.94 versus the street's $.91.
Doesn't Have The Best Stock Reaction History On Quarterly Reports
admit that the company hasn't had the best stock
reaction to quarterly reports being up only 45% of the time. The stock being down though can mean that any good news could help the stock lift. We
don't think Qualcomm is the safest stock to own based on some of the issues we list below but we like it
because of their unique positioning and the potential for huge
earnings growth in 2018.
Major Issues We Need Clarity From Tonight's Conference Call
Qualcomm's plans to aquire with NXP (NXPI) have been on hold based on
concerns from EU regulators. Qualcomm has said the acquisition would
be significantly additive to earnings. Resolving this will help the
stock move higher.
Apple and Qualcomm are locked in a legal battle about Apple
paying Qualcomm royalties on their patented technologies.
just a couple of days ago that he expected the dispute to be
settled out of court. Resolving this dispute would also help the
think however, from a 50,000 foot view, Apple's lawsuit against
Qualcomm really just shows how powerful Qualcomm is in 3G, 4G and
soon 5G chips. Even Apple is having trouble negotiating with
Qualcomm thanks to the chip maker's huge lead in this critical
guess the worst case scenario is somewhat priced into the shares as
Qualcomm has excluded receiving the disputed revenues from Apple in
their guidance. That means the risk-reward of a settlement would favor the stock moving back up.
Huge Huge Growth Ahead. Did We Say Huge?
says their addressable end markets are going to tripleby
2020. That is 2.5 years away and that is absolutely huge. (Did we say
huge yet? HUGE).
math, that's 100% growth each year. Nobody's numbers include that.
Think about that. That gives us visibility for upside to our numbers. So yes you have risks, but the upside is what? Huge!
company says they already are on their way to delivering products in
these addressable markets including Internet of Things, data centers,
autonomous driving and RF front end. With wireless now moving everywhere Qualcomm benefits.
should also be a 5G upgrade cycle from 2018 to 2020 which can also be
a meaningful driver to the company.
Wrap It Up
is more risk in Qualcomm than some of our other medium-term buy
recommendations but we think the reward based on multiple drivers
Chaim Siegel, Elazar Advisors, LLC, Happy and profitable trading!
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Disclaimer: Stocks reported by Elazar Advisors, LLC are
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