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Management has stated that they are confident Qualcomm (NASDAQ:QCOM) will be able to maintain its current growth rate for the next five years. Some reasons for these high expectations are: Huge growth of 3G smartphones in emerging markets, especially China where it has a very strong foothold; introduction of 4G LTE enabled phones in the U.S., Japan and South Korea and its building a strong relationship with Apple (NASDAQ:AAPL) for its iPhones and iPads.

It has decisively established its leadership in the high-end smartphone market and appears to have captured market share from its two rivals - Intel (NASDAQ:INTC) and STMicroelctronics (NYSE:STM). Several analysts feel that it actually took away market share from Intel and STM electronics. Until recently, Intel's Infineon chipset was one of the main suppliers of Apple's top selling iPhone, but it appears that Qualcomm's snapdragon chip might have taken the top spot.

Reasons to consider Qualcomm:

  • Snapdragon chips are also used extensively in Android based phones and as Android based smartphones are the fastest selling phones on a global basis. Qualcomm stands to benefit from this trend.
  • According to wireless intelligence reports, over 1.5 billion 3G subscribers will be added in the emerging markets (China, India, etc.) by 2015. As a result, Qualcomm is in perfect position to be benefit from this growth.
  • The growing acceptance among mobile handset manufacturers of LTE (long term evolution technology) has also served to boost growth in Qualcomm.
  • In the second quarter of 2012, it shipped 152 million MSM Chip Sets (in the first quarter it shipped a record breaking 156 million MSM chipsets, up 32% year-over-year) up 29% year over year. At present, roughly 340 devices use the snap dragon chipset, and another 400 devices are in the pipeline. Management projects that the company will ship 146-154 million MSN chip sets in the second quarter.
  • At present, 370 devices are using the Snapdragon chipset, and roughly another 400 devices are in the pipeline. It is expected to ship 144-152 million MSN Chipsets in the third quarter.
  • It received another boost from the upcoming from Microsoft's Windows 8 operating system. They are working together to develop Snapdragon Chipsets for tablets that will utilize the Windows 8 operating system. 3G and 4G LTE connectivity to these devices will be provided by Qualcomm's Gobi mobile internet connectivity solutions. It is the Sole chipset developer for both Windows smart phones and windows tablets.
  • Its purchase of Atheros communications has helped change into an integrated chipset developer for the mobile computing market. It now has the chance to expand in the consumer-electronics segment such as the home networking market.
  • It acquired intellectual property related to gesture recognition from GestureTek. They plan to integrate this technology into their Snapdragon platform. This will allow manufacturers of smartphones, tablets and other related products to come up with devices that are based on natural human gestures.
  • The dividend was raised by 16% and is effective immediately. The new annualized rate will be $1 per share, up from 86 cents.
  • A new $4 billion share buy back program was approved. This program replaces the current $3 billion share buyback program.
  • It has a fantastic balance sheet with over $25 billion in cash and marketable securities.
  • It has a strong levered free cash flow of $4.07 billion
  • Net income increased from $1.5 billion in 2009 to $4.2 billion in 2011
  • It has a decent 5 year sales growth rate of 12%
  • A strong quarterly revenue growth rate of 27%
  • A great quarterly earnings growth rate of 123%
  • Strong institutional support; percentage held by institutions is 82.6%
  • Cash flow per share has increased from $1.91 in 2009 to $3.74 in 2011
  • Annual EPS before NRI increased from $1.77 in 2009 to $3.01 in 2011
  • A free cash flow yield of 5.10%
  • A strong 5 year dividend growth rate of 10.42%
  • A low payout ratio of 32%
  • A Retention rate of 68%
  • A good 5 year ROE average of 17.8%
  • A very good interest coverage ratio of 55.6
  • A strong current and quick ratio of 3.4 and 3.10 respectively
  • $100K invested for 10 years would have grown to $325K

Company: Qualcomm Inc

Levered free cash flow= $5.04B

Growth

  1. Net Income ($mil) 12/2011 = 4260
  2. Net Income ($mil) 12/2010 = 3247
  3. Net Income ($mil) 12/2009 = 1592
  4. Net Income Reported Quarterly ($mil) = 1401
  5. EBITDA ($mil) 12/2011 = 6862
  6. EBITDA ($mil) 12/2010 = 5159
  7. EBITDA ($mil) 12/2009 = 3038
  8. Cash Flow ($/share) 12/2011 = 3.74
  9. Cash Flow ($/share) 12/2010 = 2.54
  10. Cash Flow ($/share) 12/2009 = 1.91
  11. Sales ($mil) 12/2011 = 14957
  12. Sales ($mil) 12/2010 = 10991
  13. Sales ($mil) 12/2009 = 10416
  14. Annual EPS before NRI 12/2007 = 1.77
  15. Annual EPS before NRI 12/2008 = 2.01
  16. Annual EPS before NRI 12/2009 = 1.52
  17. Annual EPS before NRI 12/2010 = 2.06
  18. Annual EPS before NRI 12/2011 = 3.01

Dividend history

  1. Dividend Yield = 1.8
  2. Dividend Yield 5 Year Average = 1.6
  3. Dividend 5 year Growth = 12.54

Dividend sustainability

  1. Payout Ratio = 0.32
  2. Payout Ratio 5 Year Average = 0.35

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 15.55
  2. ROE 5 Year Average = 17.82
  3. Return on Investment = 18.71
  4. Debt/Total Cap 5 Year Average = 0
  5. Current Ratio = 3.40
  6. Current Ratio 5 Year Average = 3.85
  7. Quick Ratio = 3.10
  8. Cash Ratio = 2.37
  9. Interest Coverage = 53.6

Interesting companies

For investors looking for other ideas detailed data has been provided on two additional companies. Our latest article could also provide some food for thought - Kodiak Oil & Gas: Earn 18% In 7 Months Or Jump In At $5.90.

Company: Applied Materials (NASDAQ:AMAT)

Brief Overview

  1. Levered free cash flow = $1.18B
  2. Profit Margin = 13.7%
  3. Operating Margin = 17.1%
  4. Quarterly Revenue Growth = - 11.20%
  5. Quarterly Earnings Growth = - 40.9%
  6. Operating Cash Flow = $2.08B
  7. Beta = 1.15
  8. Long term debt to equity ratio = 0.22
  9. Percentage Held by Institutions = 79.3%
  10. Short Percentage of Float = 1.00%

Growth

  1. Net Income ($mil) 12/2011 = 1926
  2. Net Income ($mil) 12/2010 = 938
  3. Net Income ($mil) 12/2009 = -305
  4. EBITDA ($mil) 12/2011 = 2683
  5. EBITDA ($mil) 12/2010 = 1713
  6. EBITDA ($mil) 12/2009 = -174
  7. Cash Flow ($/share) 12/2011 = 1.49
  8. Cash Flow ($/share) 12/2010 = 1.11
  9. Cash Flow ($/share) 12/2009 = 0.17
  10. Sales ($mil) 12/2011 = 10517
  11. Sales ($mil) 12/2010 = 9549
  12. Sales ($mil) 12/2009 = 5014
  13. Annual EPS before NRI 12/2007 = 1.01
  14. Annual EPS before NRI 12/2008 = 0.78
  15. Annual EPS before NRI 12/2009 = -0.05
  16. Annual EPS before NRI 12/2010 = 0.88
  17. Annual EPS before NRI 12/2011 = 1.3

Dividend history

  1. Dividend Yield = 3.3
  2. Dividend Yield 5 Year Average= 2.00
  3. Dividend 5 year = 7.68

Dividend sustainability

  1. Payout Ratio = 0.31
  2. Payout Ratio 5 Year Average = 1.08

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 12
  2. 5 Year History EPS Growth = -0.25
  3. ROE 5 Year Average = 15.17
  4. Return on Investment = 14.71
  5. Current Ratio = 2.40
  6. Current Ratio 5 Year Average = 2.62
  7. Quick Ratio = 1.50
  8. Interest Coverage Quarterly = 17.20
  9. Retention rate = 69%
  10. Five year sales growth rate = 1.53%

Company: Intel Corp

Brief Overview

  1. Levered free cash flow = $6.37B
  2. Profit Margin = 23%
  3. Operating Margin = 31.61%
  4. Quarterly Revenue Growth = 0.5%
  5. Quarterly Earnings Growth = - 13%
  6. Operating Cash Flow = $19.2B
  7. Beta = 1.07
  8. Long term debt to equity ratio = 0.15
  9. Percentage Held by Institutions = 62.4%
  10. Short Percentage of Float = 2.4%
  11. 5 year sales growth rate = 7.66%
  12. 5 year EPS growth rate = 18.23%

Growth

  1. Net Income ($mil) 12/2011 = 12942
  2. Net Income ($mil) 12/2010 = 11464
  3. Net Income ($mil) 12/2009 = 4369
  4. EBITDA ($mil) 12/2011 = 23845
  5. EBITDA ($mil) 12/2010 = 20683
  6. EBITDA ($mil) 12/2009 = 10756
  7. Cash Flow ($/share) 12/2011 = 3.78
  8. Cash Flow ($/share) 12/2010 = 2.92
  9. Cash Flow ($/share) 12/2009 = 1.97
  10. Sales ($mil) 12/2011 = 53999
  11. Sales ($mil) 12/2010 = 43623
  12. Sales ($mil) 12/2009 = 35127
  13. Annual EPS before NRI 12/2007 = 1.15
  14. Annual EPS before NRI 12/2008 = 1
  15. Annual EPS before NRI 12/2009 = 1.03
  16. Annual EPS before NRI 12/2010 = 2.05
  17. Annual EPS before NRI 12/2011 = 2.44

Dividend history

  1. Dividend Yield = 3.20
  2. Dividend Yield 5 Year Average = 2.90
  3. Dividend 5 year Growth = 12.73

Dividend sustainability

  1. Payout Ratio = 0.34
  2. Payout Ratio 5 Year Average = 0.47

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 9.9
  2. ROE 5 Year Average = 19.02
  3. Return on Investment = 25.54
  4. Current Ratio = 2.10
  5. Current Ratio 5 Year Average = 2.65
  6. Quick Ratio = 1.50
  7. Cash Ratio = 1.51
  8. Interest Coverage = 262
  9. Retention rate = 66%

Disclaimer

It is imperative that you do your due diligence and then determine if the above strategy plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies - let the buyer beware.

Source: Qualcomm A Dominant Player In The High End Smartphone, Mobile Computing Sector

Additional disclosure: EPS and Price vs industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Earnings and growth rates sourced from dailyfinance.com.