As I mentioned in my last article, QCOM has been pro-actively chasing more silicon with diversification efforts and aggressive development. There are a some key attributes to note –
The figure below represents the revenue projections for each of the positives discussed in QualComm: Chasing More Silicon.
We see that each of these events raise the growth by about 3%. The valuation of the QCOM stock with Gobi in the picture goes up to $52. Motorola coming back to its fold can also raise valuation to the same number. The 3GPP market share growth puts the share value at $50.60. with these three events being mutually exclusive, their simultaneous materialization (discounting all negative events) makes it $60.40.
So, if we superpose these events and likely scenarios on the company’s earnings, we get outliers at $28 and $60. But if I were to further pick a sequence of events from this list I have created, then I will go with
This yields a composite share valuation of $44.60. I am willing to bet this much for now. To me, more than the number itself, it is the strength it represents. While I will conclude this series in my next piece, with all these details in place, I will pose Ms. Mitra’s question back to her –
Is QCOM still a stock to short?
Note on the valuation: Cash flow was obtained as 60% of the operating profits by projecting historical data. Operating margins were computed for each scenario and year based on the QTL/QCT revenue mix. Discount was assumed at 8%.
This segment is a part in the series : QualComm