Qualcomm (QCOM) Offers Some Shelter in Worsening Economy -Deutsche Bank

Deutsche Bank is out with a research note this morning saying Qualcomm (Nasdaq: QCOM) "offers some resilience in difficult economic times." The firm maintains its Buy rating.

The firm said it has stress tested its model on Qualcomm to see if it could survive a "worst case scenario". Despite a concerning macroeconomic picture, Deutsche believes Qualcomm's underlying growth remains significant.

In its worst-case model, Deutsche lowered Qualcomm's estimated "CY09 CDMA growth rate to 0% and took WCDMA growth to 30%" (Deutsche is currently modeling up 4% and 41%, respectively), which resulted in a 6% decline in earnings and sales from the firm's current estimates. Further, "if
CDMA units decline by 5% and WCDMA grows by only 20%, earnings would decline by 11%."

Deutsche believes its estimates for Qualcomm could be conservative, as each 50 basis point raise in royalty rates adds 2.5% to EPS.

Although the firm believes macro conditions could worsen, Deutsche calls Qualcomm "undervalued at current levels." The firm points out that the stock is currently trading at a discount (15x CY09 EPS) to even its worse case scenario multiple of 17x.

QUALCOMM Incorporated designs, manufactures, and markets digital wireless telecommunications products and services based on its CDMA technology and other technologies.

You May Also Be Interested In

• Advance Auto Parts (AAP) PT Lowered to $48 at DA Davidson Following 25% Selloff Post Q2 Results
• Deere (DE) PT Lowered to $728 at UBS as Agricultural Machinery Cycle Gets Closer
• Intchains Group Ltd (ICG) PT Lowered to $2 at Benchmark Following 1H Results