Windows Opens up Qualcomm to Continued Growth

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Qualcomm (NASDAQ:QCOM) — which designs, develops, manufactures and markets digital telecom products and services — looks like the winner in the smartphone chip war, as it’s taking market share from Intel (NASDAQ:INTC) in the Apple (NASDAQ:AAPL) iPhone 4S.

That’s not all. Its Snapdragon chip will also power Windows 8 and related devices, providing another boost to revenues. Plus, Amazon’s (NASDAQ:AMZN) newly announced smartphone will also have QCOM chips.

Qualcomm had a solid fourth quarter report recently, with revenues rising 40% to $4.12 billion. The company gave guidance for 2012 of $18 billion to $19 billion in revenues, and $3.42-$3.62 in non-GAAP diluted EPS.

Using a midpoint of $3.52 and a stock price of $56 gives QCOM a forward multiple of just 16, which is cheap given its heady growth rate.

The stock sports a dividend yield of 1.5%, which should provide a further valuation floor for the stock. Technically, I’m looking for QCOM to break out to the upside, with the stock making new highs by April of next year at the $62 level.

Based on QCOM’s current market price of $56.38 and using a target price of $62, a target date of April 20, 2012, and $1,000 of investment capital, this is an excellent candidate for making some intermediate-term options gains by buying the QCOM April 52.50-62.50 Call spread.

For the full details on this trade, visit TradingBlock.com, create a free Instant Login and try the TradeBuilder feature, where you’ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy.

Create your free login, and get access to these QCOM option trading strategies by visiting the TradeBuilder here.

Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, four years as Lead Options Strategist at ThinkorSwim and three years as a Market Maker for First Options in Chicago. Tim makes weekly appearances on Bloomberg TV  “Options Insight”, Business First AM “Trader Talk”, TD Ameritade Network “Morning Trade Live” and CBOE-TV “Vol 411” to discuss everything from volatility and option related.


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