5 Reasons To Own Qualcomm

Oppenheimer is out with a pretty big call on Qualcomm (NASDAQ:QCOM), saying they are bullish on the stock and see several reasons to buy the shares. Actually, there are 5 of them:

1) First, OpCo sees strong support for their FY09 estimate of $2.42 and meaningful upside as the 3G smart-phone arms race escalates with RIM and Apple joining the fray.

2) Legal conflict pushing toward resolution: In firm's opinion, the Nokia licensing situation remains the main point of uncertainty for QCOM. They view the July Delaware case as a turning point and potential catalyst for a resolution within the next year. Firm expects the Broadcom legal overhang to be lifted by year-end as the workarounds are implemented.

3) Third, analysis of large growth funds suggests most are on the sidelines. As QCOM's earnings reaccelerate, more will have to add to positions. Firm believes as much as $1.8B could flow into the name as a result.

4) With an improving legal front, strong smart-phone contribution and a return to earnings growth post stripping out Nokia, they see a case where historical P/E multiples of 23x can be supported. OpCo is adjusting their price target accordingly, using a 23x P/E multiple on our 2009 earnings estimate of $2.42 yielding a $56 price target (up from $52)

5) With QCOM still active on the buyback front we could see another ~$0.02 of accretion if the company exhausts the nearly $2B left on its current plan.

Notablecalls: Take a look at QCOM chart - the stock is on a verge of a major break-out. Opco's Ittai Kidron is out with a kick-arse call and this will give the stock the needed push higher.

QCOM's a keeper here, for sure.

Comments

[PokerDonkey]

Reason #6: PokerDonkey is long QCOM and take a look at a 3 or 5 year chart by week. This breakout could be long term.

[Jae Jun]

But how would you rate the long term prospects for Qualcomm's 4G technology? Everyone in the world dislikes the ridiculous royalties that QCOM collects for 3G, and that is why all the major vendors and companies are signing up on LTE as their 4G tech. Look at how QCOM is doing business with Mediaflo, same QCOM business model that is bound to displease the vendors.

QCOM may be good for the mid term, but on the long term horizon, QCOM has a lot more to work through.

[Q98]

Jae Jun, you are amazingly wrong on all points! You know exactly nothing about the exclusionary and much higher GSM royalty rate structure for the first full decade of high growth (13-29% vs. Qualcomm's 4-5%); MediaFlo is being developed at Qualcomm's expense, essentially no-cost to the carriers ( as a shareholder I'd personally like to see the whole TV initiative, spectrum and all, spun off or sold now-- Qualcomm advised shareholders last year that there is no profitability foreseen for "4+ years"); Qualcomm has done a great deal of work with LTE chipsets and is ahead in that game, will collect 1 or 2% royalties for their brilliant and risky patent work if single mode LTE handsets are ever produced. Meanwhile, the fallback for LTE, to be deployed in high density sites when the economics are right, like around 2012-16, will be with multimode handsets operating over ubiquitous global 3G CDMA networks, for which Qualcomm has over 80 vendors gratefully and profitably signed up at standard rates until at least 2017, notwithstanding Nokia's noise.

Do some work, my friend. You're aware only of the headlines of inaccurate old stories. I will grant you, though, that Qualcomm's PR work has always been bad.