Trading Alert: Buy Qualcomm On Weakness

Apr.25.13 | About: Qualcomm Inc. (QCOM)

Qualcomm (NASDAQ:QCOM) looks like it will open the trading day down 5% percent or more. The company just reported their Q2 earnings and revenuesף both beat expectations. However, guidance was a little light and the shares appear they are set for a 5% pull back or so when the stock opens today. I would consider QCOM at $61-$62 a share to be a gift and I would add shares there if it gets to those levels. Let's take a look at its 2nd quarter earnings report, guidance and why it is a solid pick up on any significant sell-off.

Earnings report -

  • EPS after adjustments came in at $1.17 a share, a penny above consensus expectations.
  • Revenue came in at $6.12B, $50mm above estimates and up 24% Y/Y.
  • The company reported 173M MSM chip shipments in the quarter, up 14% Y/Y and at the high end of previous guidance.
  • Free cash flow was up 10% Y/Y to almost $2B

Guidance -

  • The company expects FQ3 revenue of $5.8B-$6.3B and EPS of $0.97-$1.05 vs. consensus of $5.88B and $1.04.
  • Qualcomm also projects FY13 revenue of $24B-$25B and EPS of $4.40-$4.55 vs. consensus of $24.1B and $4.53

5 reasons QCOM at $61 -$62 a share is a solid bargain:

  1. This arms merchant supplies Apple (NASDAQ:AAPL), Samsung (OTC:SSNLF) and Nokia (NYSE:NOK) among other manufacturers. Therefore, it is not dependent on the success of any one player just the continued growth of the smartphone market.
  2. Pricing in the pre-market sell-off, QCOM sells at under 13x 2014's projected earnings, below its five year historical average (17.5).
  3. Analysts also expect over 25% sales increases this fiscal year and over 10% in FY2014. The stock sports a five year projected PEG of under 1 (.96).
  4. The shares yield over 2% and the company has over $13B in net cash on the balance sheet.
  5. The median price target by the 38 analysts that cover the shares is $76.50 a share. S&P has its highest rating "Strong Buy" on the shares with a $84 price target.

Disclosure: I am long QCOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.