BULLS-HIT STOCK-PICKS
BS Picks has today issued a Strong Buy recommendation on QUALCOMM Inc. BS did not previously have a recommendation on this company’s stock.
QUALCOMM, symbol QCOM, is a key patent holder on the technology used for 3G or third generation wireless. “The underlying technology of all 3G networks is based on CDMA or code division multiple access” said BS telecommunications analyst Y. Disistru. With service providers now on track to deliver 3G service in the near future “virtually all providers will be utilizing QUALCOMM’s proprietary CDMA technology in one form or another.” In addition to the upfront license fee the company charges a nominal royalty fee to the manufacturers of CDMA enabled devices. Each manufacturer’s royalty fee agreement is uniquely negotiated based on various factors including whether the devices will be used domestically or exported. QUALCOMM is thought to be getting an average royalty of about 5% overall – quite a bargain considering the company single-handedly pioneered the development of commercial CDMA and as a result owns many essential CDMA patents. The company’s founder Dr. Irwin Jacobs has been philanthropic in many other aspects of his life as well with an impressive list of endowments to the arts and education.
BS fundamental analyst, C.N. Green, has followed the QUALCOMM story for many years. During the bubble the stock price got ahead of the story. “Ever since the major telecom players agreed to standardize 3G on the CDMA interface it’s been well know that QUALCOMM would be a beneficiary of that choice. However it’s taken several years until the 3G rollout which is now finally happening. “Approximately 50 million 3G devices in 2005, 100 million in 2006 and who knows how many in 2007” said Gardner Consultants’ I.C. Weighohed. “It’s a classic hockey stick growth curve.”
C.N. Green further states that the company’s current stock price is very attractively valued for a ground floor entry into this wireless enabling play. “QCOM will earn more than a buck and a half in fiscal ’06 and thus has a P/E ratio today of less than 30” (times this year’s earnings.) “Consider that the company will grow earnings between 20 and 30 percent and you realized the PEG, price to earnings growth, is approaching 1.00 -- an unbelievable bargain for a company of this caliber.” Historically it’s typical for the top technology growth companies to trade at a 2.00 PEG. “A lot of investors are probably still a little gun shy of QCOM after the stock price craziness a few years ago” suggested Green. “Problem is that if they don’t recognize the story is now playing out it’s going to be too late for them.”
BS technical analyst Char T. Reeder agrees. “I don’t know crap about the 3G story that Yuen was pontificating about.” (telecom analyst Y. Disistru) “But I looked at both the two year and five year layouts of QCOM and this sucker is ready to swim upstream.” The gruff Ms. Reeder, formerly of the northernmost province of Canada, is forgiven for her brashness due to her skills as a stock technician. “This cucumber stock, as I like to call it, has finally broken thru its five year high and there should be no resistance ahead.” Although the stock has since retraced “that doesn’t mean nuttin’” said the easily agitated Reeder. “Once a raccoon has found where you keep your garbage you think he’s not coming back?” So much for T.A.
“Keep your eye on the big picture” offered BS head telecom analyst Hiram Whinen in Boston. “There will be a lot of noise from Europe, Chiner, and even Korear but eventually they will be happy to pay the ante and play the 3G game.” Furthermore, “they will all make money from the QUALCOMM technology but our recommendation is to place your own bet on the company that owns the casino.”
The above information is confidential and for BS Picks subscribers only.
Thanks to Da Yooper form SI
AI
