Value investor calls on Qualcomm
This leading wireless technology stock trades at a bargain price relative to its growth potential.
By J. Royden Ward, Cabot Benjamin Graham Value Investor
I believe the underperformance of technology stocks has created some outstanding opportunities for value investors, as companies with outstanding sales and earnings are now available at bargain prices.
Among technology stocks, I like Qualcomm (QCOM), which designs, manufactures and markets digital wireless telecom products and services based on Code Division Multiple Access (CDMA) technology. In my view, the shares are undervalued and poised for big gains in the months ahead.
Products include global positioning systems (GPS) and integrated circuits and system software for wireless voice and data communications. The company also licenses many of its 5,700+ patents and intellectual property to manufacturers of wireless equipment.
Qualcomm continues to benefit from the rapid growth of 3G (third generation or Tri-Brand 3G) wireless technologies and smartphones in the emerging markets, including China. Globally, 85% of wireless networks support 3G technologies.
The next-generation super-fast 4G Long Term Evolution (LTE) technology will be quickly adopted in many parts of the world, and Qualcomm is now the leading provider of LTE technology.
The company's integrated circuit chipset, called Snapdragon, helps power Apple's iPhone 5, Google's Android-based smartphones including the popular Samsung Galaxy S III and S4, and Microsoft's new Windows smartphones. Qualcomm's technology is also used extensively in notebook and tablet computers.
Management believes Qualcomm will continue to achieve large market share gains. Sales will likely advance 18% and earnings per share will climb 16% during the next 12 months.
At 12.8 times my March 31, 2014 earnings per share forecast of 4.83, QCOM shares are a bargain. The balance sheet is very solid with no debt and lots of cash to fund product research and expansion projects.
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