QUALCOMM BUY Target $ 80

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Nov . 19

QCOM : NASDAQ : US$61.28
BUY Target: US$80.00

Qualcomm manufactures chipsets, licenses technology,and provides global wireless services. Qualcomm has a strong wireless intellectual property position and is a leading wireless chipset supplier.

Investment recommendation:
Iimpressed with Qualcomm’s planned investments and broad technology leadership positions in key technologies such as mobile ARM CPU design including both power and performance leadership, mobile GPUs, and its significant lead in integrated multi-mode LTE baseband chipsets. We believe Qualcomm is well positioned to post strong earnings growth in F2013 and beyond due to stable royalty rates, strong market share for integrated chipsets, and strong growth of 3G devices in emerging markets.
Investment highlights
 Qualcomm management provided a new five-year forecast for double-digit sales and pro forma EPS growth based on an improving global smartphone mix, ramping 3G penetration in emerging markets, LTE sales driving higher priced global devices and chipsets, increasing opportunities in tablets, Win8 PCs, small cells, M2M, and with expectations for a stable royalty rate longer-term.
We believe this long-term growth guidance is particularly impressive given the strong growth in F2012 and led to us slightly increase our F2014 pro forma EPS estimate from $4.70 to $4.75.
 We were encouraged by management’s comments regarding upward trending handset ASPs in emerging markets and believe Qualcomm’s F2013 guidance balances positive fundamental trends with realistic global macro-economic assumptions.
 QCT management focused on Qualcomm’s investments and leadership positions for integrated solutions including top share positions in ARM CPUs, mobile GPUs, 3G/4G modems, DSPs and RF.
We believe OEMs increasing the pace of innovation given shorter smartphone cycles benefits Qualcomm with its technology lead.

Our $80 price target is based on shares trading at roughly 17x our F2014 pro forma EPS estimate.

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