Oppenheimer's Bullish Call on Qualcomm a Convincing One

5/16 - ""Uncertainty about the legal disputes has weighed on Qualcomm (NASDAQ: QCOM)," says Richard Moroney, who rates the stock a long-term buy. The editor of Dow Theory Forecasts explains, "Though the court case may distract investors, Qualcomm's long-term fundamentals appear solid."

"Barring a disastrous court loss, which seems unlikely, Qualcomm shares should benefit. Any resolution will reduce uncertainty. By the end of this year, Qualcomm should be able to jettison some of the baggage holding back its stock.

"While the U.S. economic slowdown has sparked fears of a decline in demand for microchips, Qualcomm should benefit as cell-phone users worldwide transition to third-generation technology, which allows for faster downloading of video, music and other data...Meanwhile, through the distractions, Qualcomm has continued to post solid earnings growth."

"Qualcomm shares have risen 11% this year, compared to a 5% decline in the S&P 500 Index. At 20 times the per-share earnings of $2.21 expected over the next year, Qualcomm trades below its five-year average forward P/E ratio of 24."

5/7 - "We reiterate our Buy recommendation and the same valuation target for Qualcomm (QCOM), the largest developer of digital wireless chipsets based on CDMA technology, following the company's second quarter fiscal 2008 financial results (ended March). As further support to our rating, the company raised its financial outlook for full fiscal year 2008, despite facing a weak U.S. economy.

Qualcomm's fundamentals remain compelling as robust growth in the 3G wireless handset market (for both WCDMA and CDMA 2000 technology) are driving healthy product sales....Multiple WCDMA operators have adopted Qualcomm's BREW technology. In addition, design wins for Gobi mobile Internet solutions and the Snapdragon chipset platforms, along with major customer agreements for Firethorn financial mobility solutions and continuous network deployments of MediaFLO USA, are indicative of Qualcomm's long-term growth prospects."

"We, therefore, maintain our six-month target price of $50, which is based on a net of cash multiple of 23.0x to our estimated 2008 earnings plus $6.43 per share net cash balance."

5/4 - "Gobi, Qualcomm’s embedded dual-standard chipset for laptops has helped the company gain traction with laptop vendors. Till date five major OEMs are embedding the mobility solution in their laptops...Qualcomm also offers the Snapdragon and the Snap Star solutions that, in my opinion, are taking on Intel’s Ultra-mobile PC (UMPC) and Mobile Internet Devices (MID) initiatives. While Intel approaches these convergence initiatives as a reduction in the form-factor and power consumption, Qualcomm has proven competency in building high-performance mobile chipsets."

"While it is difficult to quantify Qualcomm’s convergence moves, the upsides are very apparent. For the purpose of valuation, I will take a conservative stance. If I assume that Gobi succeeds in penetrating 20% notebooks in 2012, and the other solutions find slightly lesser success in their segments, I estimate at least a $5.50 increase in Qualcomm’s share price. So, my verdict, based on current information, is $50 per share."

"In summary, Qualcomm has continued to create more value with a very well-thought out and visionary product roadmap and planning into the future. These diversification efforts that I have highlighted in the past will expand the company’s core competency beyond mobile phone chipsets and IP. It also makes Qualcomm more resilient in the eventuality of reversals in some of the various legal disputes that it has been involved in. Finally and perhaps most importantly, the diversification also highlights Qualcomm’s ability to adapt to the changing market needs as it continues to be the flag-bearer for the US wireless industry."