Marcial: Strong Signals for Qualcomm

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com/research/stocks/snapshot/snapshot.asp?capId=4439707'>Zacks Investment Research, who also rates the stock a "buy" and recently raised his six-month price target from $49.99 to $55 a share.

Here are some key contributors to Qualcomm's positive outlook, according to Weissman: (1) Demand for its mobile chipsets for the CDMA and WCDMA 3G-based wireless technologies is likely to accelerate beyond 2008 and should bring in new revenue sources; (2) Its media and mobile video initiatives are expected to gain momentum as Verizon Communications (VZ) deploys live television content via handsets, using Qualcommn's MediaFlo technology. AT&T (T) also announced similar offerings to its customers using Qualcomm technology, and Qualcomm has such projects being tested in Taiwan and China.

No Outstanding Debt on Its Balance Sheet

Qualcomm has also entered into multiyear licensing pacts with the major U.S. broadcasting companies, including Fox Television Group (NWS), NBC Universal (GE), CBS (CBS), and MTV (VIA), under which they will use the company's MediaFlo mobile entertainment platform to provide video content.

Financially, Qualcomm is sitting pretty, with a strong balance sheet, supported by more than $11.5 billion of cash and marketable securities, and no outstanding debt. "The company continues generating positive free cash flow," notes Weissman.

The stock isn't cheap, as it is trading at a premium when compared to its peers—22.3 times estimated calendar 2008 earnings of $2.18 a share. The peer group's average price-earnings ratio is 21. For calendar 2009, American Technology's McKechnie forecasts earnings of $2.50 a share. He feels the premium p-e is justified as he notes that Qualcomm's near-term business appears intact, in part due to strong demand for cellular phones and new 3G wireless rollouts. Much of Europe uses other wireless technology standards, mainly GSM and other competing wireless protocols. But Qualcomm bulls are confident that the use of CDMA-based networks will continue to expand worldwide.

One of them is Vindu Benjamin of First Global U.S. Research, who rates Qualcomm "moderate outperform." He says that in view of the "rapid growth in the number of 3G CDMA-based networks and subscribers worldwide, we believe the growth of Qualcomm's CDMA-based devices will be driven by increased shipments to various regions around the world, particularly the emerging countries, such as India and China, followed by the U.S., Europe, and North America."

So far Qualcomm has been a good call for the bulls. And its prospects should remain bright as Qualcomm's digital wireless technology finds its way into more markets worldwide.

Marcial writes the Inside Wall Street column for BusinessWeek. In 2008, FT Press published the book Gene Marcial's 7 Commandments of Stock Investing.