by Tom Taulli | March 6, 2012 1:06 pm
[1]So far this year, tech has posted standout gains. But the bull run is hitting a wall today. Top companies like Apple (NASDAQ:AAPL[2]), Dell (NASDAQ:DELL[3]) and Google (NASDAQ:GOOG[4]) have lost anywhere from 1% to 3%.
But there’s still some good news. Just take a look at Qualcomm (NASDAQ:QCOM[5]). The company announced a 16% increase in its dividend as well as a $4 billion share buyback. How about that for confidence?
A key reason for Qualcomm’s strength is Apple. Consider that it’s the sole supplier of baseband chips for the iPhone 4S.
It certainly helps that Qualcomm’s CDMA technology is a global standard and is protected with thousands of patents. All in all, it would be extremely difficult and expensive for a competitor to come up with an viable alternative.
Qualcomm has also been investing in next-generation technologies, such as the so-called Long-Term Evolution (LTE) version of 4G. This is supposed to be a key feature in Apple’s new iPad, set for public launch tomorrow.
In light of all this, it should be no surprise that Qualcomm has been growing at a hefty rate. For fiscal 2012 (ending September), the company expects to generate revenues of $18.7 billion to $19.7 billion. This represents a ramp of 25% to 32% over 2011.
True, Qualcomm’s stock has already rallied 14% for 2012. Yet it still has a reasonable valuation, at 23 times earnings — which is in line with its growth rate.
But Qualcomm isn’t only about Apple. The company is also seeing lots of traction in China and India, which should provide long-term growth. There may also be a lift from the aggressive push from the Lumia devices of Nokia (NYSE:NOK[6]) and Microsoft (NASDAQ:MSFT[7]).
As for today, Qualcomm’s stock is off about 0.6% to $61.72 in midday trading. But for investors looking to participate in the mobile revolution — which shows no signs of slowing down — this stock looks like a good opportunity.
Tom Taulli runs the InvestorPlace blog IPO Playbook[8], a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling”[9] and “All About Commodities.”[10] Follow him on Twitter at @ttaulli[11]. As of this writing, he did not own a position in any of the aforementioned securities.
Source URL: https://investorplace.com/2012/03/why-qualcomm-is-uber-confident/
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