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Qualcomm stock soars
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December 29, 1999: 4:14 p.m. ET
Mobile-phone maker shares rise after PaineWebber sets target of $1,000
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NEW YORK (CNNfn) - Shares of Qualcomm Inc., already the top percentage gainer in the S&P 500 this year, jumped another 29 percent Wednesday after PaineWebber predicted the stock would double over the next 12 months.
Shares of Qualcomm (QCOM), a San Diego-based maker of mobile phones and the chips that operate them, rose 156 to close at 659 after analyst Walter Piecyk opened coverage with a "buy” rating and set a $1,000 price target on the stock.
With demand for mobile-phone service soaring, Qualcomm’s stock has been on a remarkable ride, rising 21-fold over the last 12 months. Qualcomm "represents an appropriate way to invest in the long-term growth trends of wireless and data," said Piecyk in a research note Wednesday.
Qualcomm is the developer of Code Division Multiple Access, or CDMA, wireless technology. The company currently sells more than 90 percent of the integrated chips used in CDMA phones, and it collects royalties on all such phones sold, Piecyk said.
Piecyk said he expects that, over the next decade, 85 percent of phones sold will be built upon CDMA technology, up from 18 percent currently. That, he said, could bring in as much as a $20 billion royalty stream for Qualcomm.
Despite the ballooning market value of the company, "the value of Qualcomm is that their technology is going to be the technology of choice for the next generation,” Piecyk said in an interview with CNNfn Wednesday morning.
A.G. Edwards’ David Heger questioned Piecyk’s valuation of Qualcomm (668K WAV or 668 AIFF), while others said the upbeat story is nothing new.
"Walt has always been a day late and a dollar short,” Alex Cena, an analyst with Salomon Smith Barney, said. "Where’s he been all year?”
Cena, who has a "strong buy” rating on the stock, raised his price target last week to $600 per share. He said $750 a share is "easily possible,” but added that $1,000 a share is "a stretch.”
Among the potential risks for Qualcomm, Piecyk said, are that the blistering growth in the wireless market may not hold up and a competitor may step forward "with a better mousetrap.” However, he said he does not think either of these outcomes is likely.
Piecyk said the company could enjoy strong growth in markets such as Brazil and China, and could tap chip demand among leading mobile-phone makers, such as Ericsson (ERICY), Nokia (NOK) and Motorola (MOT).
"The big differentiating factor with Qualcomm is that you don’t care who wins,” said Cena, because it will supply any of those companies. "All the competition is its customers.”
The potential threat from the rival GSM mobile-phone standard was erased recently after the backers of that standard said that they plan switch to CDMA within three years, Cena said.
GSM is a leading standard overseas, while CDMA dominates the U.S. market.
According to Cena, Qualcomm has about 600 patents, of which about 400 are already granted and 200 are pending. Only some of the patents are expected to expire in 2010, meaning Qualcomm has a near lock on the royalties in the market for the next decade.
Last week, Qualcomm said its shareholders approved a 4-for-1 stock split, which is effective Thursday and available to shareholders of record as of Dec. 20. And the company also recently agreed to sell its consumer-phone business to Japanese electronics company Kyocera. 
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Qualcomm
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