We maintain our Buy rating on the shares of Qualcomm, Inc. (QCOM). Increasing demand for mobile broadband services and worldwide growing adoption of 3G wireless technologies accompanying consumer preference towards high-end smart-phones enabled the company to announce third quarter fiscal 2008 financial results that were above our estimates.
The company's fundamentals remain compelling as massive growth is expected for the availability of 3G CDMA devices which will drive healthy product sales together with robust average selling prices. Qualcomm's legal settlement with Nokia (NOK) for royalty related issues and a new 15 years licensing agreement significantly strengthens Qualcomm's business planning. Gobi Internet solutions, Snapdragon chipsets, MediaFLO USA, and Firethorn mobile payment services are now the next phase of opportunities for the company.
Qualcomm shares are trading at 24.5x our estimated earnings for fiscal 2009, which represent a premium to both the S&P 500 and the industry group averages. However, after adjusting for the $6.76 per diluted share net cash and marketable securities (at the end of the third quarter of fiscal 2008), Qualcomm is trading at 21.35x our forward 2009 earnings.
The company's investments in new areas that leverage mobile media, data access cards, financial mobility, and next-generation multimedia combination chipsets, further endorse the possibility of future shareholder payout in the form of increasing earnings and dividends. We, therefore, raise our six-month target price of $60, which is based on a net of cash multiple of 24x our estimated 2009 earnings plus $6.76 per share net cash balance.
Nalak Das contributed to the report.
Read the full analyst report on QCOM
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