Friday, 10 February 2012

Can't Decide on Apple? Buy Qualcomm

Are you still not sure whether Apple is a good buy or not? Despite the many investors who believe it’s overvalued the stock continues to rise. I believe it’s because mobile technology is constantly evolving. If you also think that this industry has huge long term growth potential then Qualcomm may be the smarter purchase.
Qualcomm (QCOM) is an incredibly successful company who enjoys a first-mover advantage and is the leading player in mobile technology. They are the suppliers for major corporations such as Apple, Samsung, Nokia and HTC who provide us with smartphones, tablets, and anything else that needs a mobile connection. Microsoft has recently announced that they will also use their products for the new Windows 8 operating system. Therefore it is clear that it doesn’t matter who wins the war in the tablet and smartphone markets because they all use Qualcomm in one way or another.
Qualcomm creates the chipsets and the technologies used to spoil us with our 3G and 4G capabilities and best of all they have the ability to sustain their advantages. Currently they have more than 200 patents that allow them to make over 35% of their revenues through licensing technologies and collecting royalties. Recently the company announced record quarterly results in receiving $4.82bn in revenue, which is up by 40% year-over-year. Right now they are trading at $61/share with a market cap of $104bn and they have no long term debt. They paid out over $300 million in a cash dividend and repurchased 2 million shares of common stock last year. Both of which are great signs for shareholders.
Lastly the biggest source of growth I see in the near future is the likelihood of developing markets like China, India, and Latin America to upgrade their devices with the 3G and 4G capabilities. Currently they all use older systems but have very large mobile markets.

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