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Qualcomm: Conviction Rewarded

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The first thing I'm going to say is that I really believe Qualcomm (QCOM) should be up more on its earnings report. Yesterday, I stated the stock should/could reach $65 on the beat I predicted. However, the caveat was that this market is constraining any meaningful valuation expansion.

Intermediate to longer-term, I still feel my low-$80's price target will be hit and frankly $100 would not surprise me. It's just a matter of time and a little help from Mr. Market. The clear risk-off feel hangs in the air and serves to compress the big winning reports. I have essentially had the same thesis on QCOM since mid-2010 (if not earlier) which is predicated on a multi-year cycle from 2G to 4G/LTE and beyond. My last summary point is that while Apple (AAPL), Google (GOOG), and Microsoft (MSFT) get lofty praise on cash flow, QCOM is just as strong. Before the quarter, QCOM had roughly $24 billion in net cash, and it added a whopping $4.3 billion to that number. This is similar to what AAPL has done percentage-wise in its best cash production quarters.

Bottom line, this name remains one of my favorites and in fact is either my first or second-ranked semiconductor name depending on valuation.

For headlines from FlyOnTheWall and some more thoughts, see this list:

-Qualcomm gaps up after stronger earnings report, with shares as high as the mid-$63's pre-market. -- this will serve as the next breakout level.
-Qualcomm reports Q4 EPS 89c, consensus 82c, with revenue $4.87B, consensus $4.67B.
-Qualcomm says smartphone demand "particularly strong".
-Qualcomm sees Q1 EPS $1.08-$1.16c, consensus $1.00. -- big guide here and I think it's possibly a bit conservative.
-Sees revenue $5.6B-$6.1B, consensus $5.29B.
-Qualcomm sees FY13 EPS $4.12 - $4.32, consensus $4.13, with revenue $23B - $24B, consensus $21.69B. -- This FY guide is more important in my view.
-Qualcomm: Company currently has over 220 royalty-bearing 3G licensees, has added more than 20 new Chinese licensees.
-Qualcomm sees 2013 3G/4G device shipments growing approximately 14%. -- Again, this could prove a bit light.
-Sr. Management states "the company's long-term growth drivers remain intact." -- Ya THINK?
-Qualcomm says increasing focus on licensing display technologies. -- while not appreciated currently, this could be another significant forward driver.

For more details on Qualcomm's earnings report, click here.

Twitter: @UdallTechStrat