Qualcomm Brings Value Back To Its Stock

Many of us would like to forget when the dot-com era bubble burst about a decade ago. Qualcomm

is one of those companies from the "Gilded Age" that is still working on its comeback story. A recent Barron's

discussed how Qualcomm is looking more and more like a solid investment. Qualcomm, at its all-time high was trading at a pre-split price of $652, which was a lofty 100x forward earnings. PaineWebber even had the audacity to out a $1,000 PT on the stock at the time. Nowadays, Qualcomm is trading at a mere $53.30, which is a bit more realistic to the value or the company at 18x projected earnings. Qualcomm's latest earnings report showed investors that wireless communications are continually evolving and growing around us. The latest surge in its business will be from cellphone and tablet demand. Qualcomm makes chips that manage the communications in cellphones and tablet computers. Tiernan Ray of Barron's says that the company is a cornerstone of the new era of networked devices. Ray thinks that the stock can gain another 20%. Qualcomm's sales took a beating in 2009 as the economy tumbled and the company has been slow to recover. Some analysts have the company posting as much as 30% revenue growth as well as 24% profit growth, which adds up to a billion dollars more than expected before last week's conference call. The CEO, Paul Jacobs, told investors on the call that smartphones sold around the world will rise 50% this year and the company's chip shipments are expected to rise 23% to 800 million units. He added, the more chips it sells into smartphones, the better, because of the complexity of the devices, Qualcomm reaps in higher royalties and profit margin. Adam Benjamin, an analyst with Jefferies, recently wrote that he expects Qualcomm will be increasingly able to sell a chip called "Snapdragon" into not just phones but also tablets. He has a Buy rating and a $68 PT on QCOM. On the downside, Tiernan adds that royalty rates could turn out to be less than the company estimates and competition is always stiff, but it is no reason to keep the stock price down. QCOM is trading lower at $53.52