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Monday, January 22, 2007

Calls of Note Part 3

Couple of firms are commenting on Qualcomm (NASDAQ:QCOM) this AM:

- CIBC notes QCOM shares have been under pressure for some time given the ongoing dispute around its licensing program. While they believe it will still take time until these issues are resolved, they see several fundamental drivers improving through 2007 and believe valuation is now better supported.

While parts of 2007 saw sluggish 3G trends, the believe recent results and comments from handset OEMs suggest increasing competition in the area in 2007 as they try to improve ASPs and margins. CIBC believes the WCDMA market can surpass QCOM's 175M unit target (firm's forecast is 178M).

Firm expects QCOM's WCDMA chipset share to rise in 2H07 as MOT slots QCOM this summer and turns more aggressive in 3G. They are raising their estimates slightly (weighted to 2H07/2008). 07/'08 EPS estimates are raised to $1.82 and $2.09 from $1.80 and $1.97. NOK is still included.

Currently, QCOM's shares are trading at 18.6x revised $2.09 FY08 EPS estimate. If Nokia is taken out,they estimate FY08E EPS would be around $1.80, reflecting a current 21.5x multiple. Either way the firm sees value at these multiples and with fundamentals improving in 2H07, they see upside.

Maintains Sector Outperformer and $45 tgt.

- UBS notes that at MOT's analyst day last Friday, MOT mgmt referred to QCOM's previously announced 3G chipset win as "significant". Checks indicate cost structure is more attractive than MOT's current Freescale soln, which could result in more meaningful mkt share in MOT's future 3G handsets than we originally anticipated. By firm's calcs, every 5m chipset upside results in ~$0.01 in EPS in FY07/08, all else equal.

MOT indicated it expects 3G (WCDMA/HSDPA) to drive replacements in 07, though likely more in 2H07. MOT also indicated 3G handset price reductions by handset vendors in 4Q06, which the firm believes is key element to adoption due to elasticity to lower pricing. While the ramp coincides w/ MOT's ramp in 3G handsets, nonetheless they view MOT's 3G industry commentary positively.

Maintains Buy and $50 tgt.

Notablecalls: Not actionable but good to know category. The comments are positive but I'm not sure it's enough to put some real fire under the stock. Overall, it's good to see sentiment finally starting to turn in favour of QCOM.

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