Qualcomm's (QCOM) Diversity Could Speed-Dial Returns to Investors - Barron's
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According to a Barron's article today, Qualcomm (NASDAQ: QCOM) has the cash, market share, and patents to make it a viable choice for your portfolio.
Shares of the stock have seen an increase of 4% over the last 52-weeks, compared to gains of 63% for the NASDAQ. Shares were up to about $47 before dropping to $40 after the company reported a weak outlook during their Q110 earnings release, a 16.6% drop. The company revised their key metric for selling price per handset, from $198 to $184.
Qualcomm, due to a patent held by the company, receives a cut of every 3G phone sold around the world. However, with depressed pricing, the royalties become smaller and smaller. Royalties currently make up about 35% of QCOM's revenue and a majority of its profit.
The company also manufactures chipsets for wireless handsets and mobile computers. Bulls on the stock sees FY10 as a transitional year, when QCOM could expand its market share for chips at the expense of some profits.
The stock, at $39.30, is trading at a forward P/E of 15.7x, and looks even cheaper when considering the $11/share in net cash the company holds.
The Street consensus is calling for the stock to turn in an earnings report with and EPS of $2.23, from $1.90 in FY09, and down from $2.25 in FY08. EPS is expected to grow 11.2% to $2.48 in FY11.
A slower recovery in expected in Europe, and emerging markets are still embracing cheaper phones for the time being.
QCOM is still well diversified though, having its hands in several areas of phone growth. Along with the 3G technology, the company has a 90% market share in Code Division Multiple Access (CDMA) handsets. The benefit is that many 3G carriers are now turning to a CDMA variant, which is more good news for the carrier.
Though the company is estimated to be manufacturing 40% of 3G chips for GSM carriers now, that number is expected to grow in the future as 3G gains global presence.
Deutsche Bank says that just 33% of mobile phones shipped in 2009 were 3G enabled, which could move up to 40% for 2010, and 72% by 2015.
Shares of the stock have seen an increase of 4% over the last 52-weeks, compared to gains of 63% for the NASDAQ. Shares were up to about $47 before dropping to $40 after the company reported a weak outlook during their Q110 earnings release, a 16.6% drop. The company revised their key metric for selling price per handset, from $198 to $184.
Qualcomm, due to a patent held by the company, receives a cut of every 3G phone sold around the world. However, with depressed pricing, the royalties become smaller and smaller. Royalties currently make up about 35% of QCOM's revenue and a majority of its profit.
The company also manufactures chipsets for wireless handsets and mobile computers. Bulls on the stock sees FY10 as a transitional year, when QCOM could expand its market share for chips at the expense of some profits.
The stock, at $39.30, is trading at a forward P/E of 15.7x, and looks even cheaper when considering the $11/share in net cash the company holds.
The Street consensus is calling for the stock to turn in an earnings report with and EPS of $2.23, from $1.90 in FY09, and down from $2.25 in FY08. EPS is expected to grow 11.2% to $2.48 in FY11.
A slower recovery in expected in Europe, and emerging markets are still embracing cheaper phones for the time being.
QCOM is still well diversified though, having its hands in several areas of phone growth. Along with the 3G technology, the company has a 90% market share in Code Division Multiple Access (CDMA) handsets. The benefit is that many 3G carriers are now turning to a CDMA variant, which is more good news for the carrier.
Though the company is estimated to be manufacturing 40% of 3G chips for GSM carriers now, that number is expected to grow in the future as 3G gains global presence.
Deutsche Bank says that just 33% of mobile phones shipped in 2009 were 3G enabled, which could move up to 40% for 2010, and 72% by 2015.
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