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Independent Financial Advisor / Professional Investor- with over 25 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice and Experience to produce Portfolios focused on achieving positive... More
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  • QualComm- Growth, Value &  0 comments
    Aug 11, 2013 12:44 PM | about stocks: QCOM

    Back in April I stated my opinion on (NASDAQ:QCOM) as an addition to portfolios after they announced a positive earnings report.


    I later added my continued positive outlook back in July , after the company continued to impress with earnings.


    Qualcomm hasn't gone unnoticed by other analysts here, recently one of the best, Chuck Carnavale just penned an article highlighting QCOM, using his fast graph valuation as a backdrop.


    Let's take a more "in depth" look at the story here as QCOM is one of my favorite selections for the reminder of this year and into 2014.

    Qualcomm reported results for fiscal 3Q13 with revenue of $6.24 billion which came in slightly above the analyst estimates of 6.12 billion.

    EPS & Gross margins both were also in line with expectations. So why am I expecting above average price performance for QCOM ?

    Present valuation, EPS growth and expected dividend growth are the reasons for my bullish stance on the shares. Fiscal 13/FY14 EPS estimates are now coming in at $4.75/$5.25 respectively.

    At current prices, QCOM has a forward looking PE of 12X- 13X which is currently below the current S & P value. I believe that Qualcomm is positioned to grow its EPS at double-digit rates for the next two to three years as 3G/4G smartphones continue to grow globally and connected devices beyond phones move from niche to mainstream.

    With double-digit earnings growth likely for a few more years, and a 2.3% dividend yield, QCOM deserves to trade at a premium to the overall market . If QCOM just trades in line with the "market" and a 15-16 multiple is applied , the share price will trade to the mid 80's level.

    The current dividend is attractive at these levels ,and with the dividend increase of 40% this year , prospects for future increases should be in the cards for shareholders as Qualcomm's balance sheet is in great shape. QCOM sports a Free Cash Flow Yield of 6.6%. Combine that with double digit growth prospects (a rare combination) as we go forward, and you have the ingredients for a stock that can provide above average returns.

    Long term investors can start to scale into positions here in the mid to low 60's .. Any pullbacks due to market weakness to the 60 -61 level ( I last added shares @ 59 in July) would present a great buying opportunity.

    Best of Luck !

    Disclosure: I am long QCOM.

    Additional disclosure: Stocks4income@usa.com

    Stocks: QCOM
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