Qualcomm (QCOM): Top Portfolio Stock for Long Term Technology Investors

You may feel lucky if you had stayed on the sidelines, but don’t wait too long, as otherwise you may feel left out soon. It’s a favorable time for building up your stock portfolio for 2012 as valuations are still at fairly cheap levels. But the real maize is which companies and sectors you should add to your portfolio amid current market environment? Let’s start building a solid stock portfolio for 2012 with our most favored Technology sector and our first pick Qualcomm (QCOM)

The Dow Jones Index is managing to close the year on a positive note, but barely. However, the broader markets remain spooky as volatility continues to hamper investor sentiment. Well, I don’t blame stock markets for their dismal performance as good stock pickers and smart traders still made loads of money.

Sector: Electronic Technology

Industry: Telecommunications Equipment

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Qualcomm (QCOM) has the largest market capitalization (roughly $91.5 billion) among its competitors and peers and enjoys a high P/E ratio of 20.1. The strength of their business can be judged by comparing their performance to leading players from the same sector. Take a look at where they stand in terms of market capitalization and P/E ratio-

• Telefon AB L M Ericsson (ERIC) has market cap of around $29 billion and enjoys a P/E ratio of 5.2
• Motorola Solutions Inc (MSI) has a market cap of around $15 billion and a P/E ratio of 20.7
• Nokia Oyj (NOK) has a market cap of around $18.5 billion and enjoys a P/E ratio of 6.7

This five year stock chart clearly shows the outperformance that Qualcomm has delivered in recent years.

If your investment horizon is limited till the end of 2012, you can expect decent returns from Qualcomm stock price appreciation. It gets more exiting for someone who is willing to invest and hold the stock for even longer timeframe. Let’s see why?

 

Understanding Qualcomm’s Business

QUALCOMM, Inc. develops, designs, manufactures and promotes digital wireless communication systems derived from Code Division multiple Access, we commonly call  CDMA. San Diego, USA based QUALCOMM specializes in development and distribution of CDMA based system software and integrated circuits for digital voice and data communications. Further, they also specialize in global positioning system products and multimedia functions for wireless gadgets. The company business mainly revolves around four reportable segments:

• Qualcomm Technology Licensing
• Qualcomm CDMA Technologies
• Qualcomm Strategic Initiatives
• Qualcomm Wireless & Internet

Qualcomm designs and supplies wireless communication systems that are used in most mobile devices manufactured or assembled by various mobile companies worldwide. Qualcomm enjoys a huge portion of royalty incomes from all such mobile manufacturers around the globe for its intellectual property (CDMA technology) that they license to wireless and digital telecommunication handsets manufacturers. The company also is the grand supplier of chips to the semi-conductor markets worldwide. These chips are also used in manufacturing wireless handsets.

Qualcomm is the owner of various key patents of the widely adopted 3G and 4G technologies, such as Long Term Evolution (LTE).

Qualcomm isn’t just about what we hear in the news. They have a wide range of products based on high-end technology such as tracking devices, semiconductors, satellite phones, MediaFLO, QChat, Qualcomm Gobi among many others that fetch large chunks of revenue to the company from all the corners of the world.

 

Imapct of 3G Technology

Qualcomm, the world leader in 3G technology space has helped the technology penetrate to every household and the smallest of all business houses all across the world. 3G enjoyed warm welcome and quick acceptance attributable to the high speed, high quality that they promised and delivered. With the improved voice capacity and fast data transfer rates, consumers are able to make the best out of the technology and enjoy more hours of use without interruption. The technology has enabled mobile handsets, 3G enabled computers, laptops and tablets, and many other consumer electronics used in domestic, professional and industrial use. Qualcomm Inc.. is all set to take advantage of the fast growing 3G acceptance and plunge into the more sophisticated and modish 4G technology.

 

Scope of Growth in Wireless Communication

The past decade has witnessed immense development in the field of telecommunications and wireless device usage. The number of mobile connections all over the world was estimated to be 5.28 billion at the end of 2010 and is projected to reach 6.8 billion by the end of 2014. Out of these 6.8 billion mobile connections across the globe, 2.75 billion connections are expected to be 3G enabled.

 

Qualcomm has come a long way all through these past 25 years when their ideas and innovations have penetrated deep not just in the field of wireless communications and helping people reach digital information, but also in the segments like entertainment at global levels. At present, Qualcomm Inc. are influencing the combining wireless communications and consumer electronics, developing wireless and digital devices, ensuring personalized, reasonably priced and handy information and communication services.

The company will taste the flavor of emerging market growth through the expansion of its 3G business in India and China.

 

Qualcomm (QCOM): Best Buy Price and Target Price

Wireless communication industry is fast booming and its growth largely depends upon Qualcomm’s technology. However, the stock is currently trading cheap despite stellar numbers from the company in recent quarters.

I would rate this stock as a strong buying candidate in the price range of $50-$55, and one should not leave the opportunity if this stock gets below $50 on any trading day.

12 Month Price Targets

Aggressive: $80

Conservative: $55

Neutral: $64

Key Data Highlights

Qualcomm’s Latest Financials

Qualcomm’s Growth & Valuation Data

 

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