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In his estimation, the economy’s effect on the company has been “somewhat muted.” As the demand for smartphones and tablet computers has increased this year, so has the demand for the company’s chips. Over the next five years, Jacobs said that Qualcomm anticipates a compound annual growth rate of at least 10 percent for revenue and earnings per share.
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The company’s fiscal year earnings release revealed the basis of Jacobs’ confidence. On November 7, Qualcomm reported earnings per share of $3.51, an increase of 39 percent year-over-year, and revenue of $19.12 billion, up 28 percent from the year before.
Citigroup analysts also see the chip manufacturer in a positive light. On Thursday, Citigroup chip analyst Glen Yeung reiterated a Buy rating on Qualcomm and a $75 price target on the company’s shares. According to Barron’s, the rating was based on Yeung’s belief that the high rate of growth in smartphones as well as growth prospects in China and emerging markets will make the chip manufacturer a winner.
Fellow Citigroup analyst Kevin Chang stated in a note written earlier this month that smartphones sales could grow to 738 million units this year, up from 481 million in 2011.
Qualcomm is well situated to take advantage of that growth. According to Yeung’s research note, Amazon (NASDAQ:AMZN) is set to launch a smartphone based on the company’s MSM8960 baseband/app processor, which will be priced below $300 and be released next June. With the rumored phone priced at the lower end of the traditional smartphone pricing scale, the industry could be preparing for a wave of change. Chang thinks that will be the case. “Given the rising competition, we expect many traditional $200-500 smartphones to be wiped out in the next few years,” he wrote, “leaving little future for companies that lack high-end exposure.” If this is the case, Amazon’s Qualcomm-based phone could take on others like Apple (NASDAQ:AAPL), which uses the company’s chips in its iPhones as well.
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