Silver cited several reasons for upgrading the stock:
Believe WCDMA handset sales in 2008 could “significantly” outpace expectations. Silver raised his 2008 WCDMA handset forecast to 270 million units from 257 million, and says the total could top 300 million. Shares appear to already discount 3%-3.5% royalty rate for WCDMA. Expect a second half resolution with Nokia. “Despite all of the rhetoric, we believe the prospects for a resolution have increased somewhat – although still not likely before April. This is not due to our confidence in QCOM’s case or ability to stave off Nokia necessarily, but rather subtle indications that QCOM has been more flexible in its licensing program when necessary.”
“Under a reasonable scenario assuming a reduction in the royalty rate,” Silver writes, “we estimate QCOM could grow EPS at a 15-20% CAGR over the next 3 years.”
Qualcomm shares Friday were up 55 cents at $38.81.
QCOM 1-yr chart