September 19, 2016

QUALCOMM Incorporated
NASD: QCOM - Telecommunications Equipment

Grade Earnings Quick Facts

58.3 Last Earnings Release

Last Qtr. Actual vs. Est.

07/21/2016 Dividend Yield

$1.16 / $0.98 52 Wk High

3.21%

$63.47

Next Release 11/02/2016 N/A 52 Wk Low $42.96

$62.99
09/16/2016
Year Ending 09/30/2016 $4.30 Short Interest 1% of float
Rated 'HOLD' since Mar 31st, 2016, when it
Year Ending 09/30/2017 $4.75 Market Cap $92.8B
was upgraded from 'SELL'

Overview
Acceptable Grades Put Stock Near BUY Rating
MarketGrader currently has a HOLD rating on
QUALCOMM Incorporated (QCOM), based on a final
overall grade of 58.3 scored by the company's
fundamental analysis. QUALCOMM Incorporated
scores at the 83rd percentile among all 5888 North
American equities currently followed by MarketGrader.
Our present rating dates to March 31, 2016, when it was
upgraded from a SELL. Relative to the
Telecommunications Equipment sub-industry, which is
comprised of 67 companies, QUALCOMM
Incorporated's grade of 58.3 ranks seventh. The
industry grade leader is Ubiquiti Networks, Inc. (UBNT)
with an overall grade of 87.7. The stock, up 23.85% in
the last six months, has outperformed both the
Telecommunications Equipment group, up 10.69% and
the S&P 500 Index, which has returned 5.07% in the
same period. Please go to pages two and three of this
report for a complete breakdown of QCOM's
fundamental analysis.

Price, Rating and Sentiment History - 2 Years

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 September 19, 2016

QUALCOMM Incorporated
NASD: QCOM - Telecommunications Equipment 58.3
While Not Entirely Negative, Growth Indicators Show Several Signs of
Growth B- Weakness
QUALCOMM Incorporated sales growth record showed a modest
Market Growth LT Fimprovement in its latest quarterly report. Its total revenue increased
3.64% during the period to $6.04 billion from $5.83 billion booked in the
Market Growth ST Byear earlier quarter. This compares favorably to the company's 1.84%
EPS Growth Fdecline in 12-month trailing sales over a three year period. Including the
latest quarter, QUALCOMM Incorporated had $22.83 billion in 12-month
Growth Potential Dtrailing sales compared to $23.26 billion in the comparable period ended
three years ago. The latest improvement is not large enough to reverse a Revenue Qtrly. 06/30/2016 $6B
Earnings Momentum A-
long term declining trend, something that will require one or two more Revenue Qtrly. Year Ago $5.8B
quarters of much better top line growth. It also reported outstanding profit Revenue 1 Yr. Chg. 3.64%
Earnings Surprise Bgrowth last quarter from the year earlier period, contrasting with a long Revenue 12 Mo. Tr. Latest $22.8B
term decline in full year profits, which we measure over a three year period. It therefore appears that the company Revenue 12 Mo. Tr. 3Y Ago $23.3B
is in the process of reversing its long term trend of falling profits. QUALCOMM Incorporated's Second quarter Revenue 12 Mo. Tr. 3Y Chg. (1.84%)
profit jumped 21.96% to $1.44 billion from $1.18 billion (excluding extraordinary items) reported in the year
earlier period; on the other hand, also including its first quarter results, its 12-month trailing net income dropped
21.71% to $5.17 billion from the $6.60 billion it had earned in the 12 months ended three years earlier. The
company's margins have been shrinking steadily during the last three quarters, albeit at a slower rate during the
latest period. Its EBITDA, operating and net margins fell on average by 5.48% in the latest quarter versus the year
ago period.
Investors reacted very positively to the company's July 21, 2016 earnings report, which came 18.37% above the
consensus estimate for the period; the stock jumped 9.55% on the news. With this earnings release QUALCOMM
Incorporated continued a trend of positive earnings surprises; it has beaten the Street's estimate by an average of
8.11% over the last six quarters, certainly a positive indicator for the stock.

Net Income Qtrly. 06/30/2016 $1.4B

Net Income Qtrly. Year Ago $1.2B
Net Income 1 Yr. Chg. 21.96%
Net Income 12 Mo. Tr. Latest $5.2B
Net Income 12 Mo. Tr. 3Y Ago $6.6B
Net Income 12 Mo. Tr. 3Y Chg. (21.98%)

Assuming the Company's Fundamentals Don't Deteriorate in Coming

Value B+ Quarters, the Stock's Valuation is Acceptable at this Level
QUALCOMM Incorporated's stock, currently priced at 13.52 times 12-
Capital Structure B+
month earnings per share, trades at a 33.29% discount to our "optimum"
P/E ratio of 20.26. This is calculated by MarketGrader based on the
P/E Analysis A-
company's EPS growth rate in the last five years, using reported quarterly
Price/Book Ratio figures. By this measure, QUALCOMM Incorporated's earnings per share
A-
have increased at an annualized rate of 6.95% in the last five years. This
Price/Cash Flow Ratio A-
rate of growth could decelerate soon given the company's recent margin
contraction, despite such good Profitability grades. This could in turn put P/E Ratio 12 Mo. Tr. 06/30/2016 18.47
Price/Sales Ratio F
pressure on the stock price. The stock is also valued at 13.52 times the
Optimum P/E Ratio 20.26
company's forward earnings estimates for the next four quarters, which
Market Value A-
means that it trades below its trailing P/E and the market's forward P/E of Forward P/E Ratio 13.52
S&P 500 Forward P/E Ratio 15.20
15.20 (based on earnings estimates for the S&P 500). Therefore investors may see the current valuation as fully
reflecting the company's EPS growth prospects and its current fundamentals. Price to (Tangible) Book Ratio 6.92
Price-to-Cash Flow Ratio 13.37
QUALCOMM Incorporated's current share price seems inexpensive compared to its book value, trading at a 3.05
Price/Sales Ratio 4.06
price to book ratio. However, when intangible assets such as goodwill, which account for a full 55.88% of the
company's total shareholders' equity, are subtracted from its total assets, the stock's price to book ratio increases
quite significantly to 6.92, a richer multiple. The stock's price to cash flow ratio of 13.37, based on the $4.71 in
cash flow per share generated by QUALCOMM Incorporated. in the last four quarters, could be interpreted as
investors' unwillingness to pay too much for the company's earnings prospects in light of its overall fundamental
weakness. Based on its price to sales ratio of 4.06, its shares trade at a sizable 150.90% premium to the
Telecommunications Equipment average of 1.62 times trailing 12-month sales. Our final value indicator looks at
the relationship between the company's current market capitalization and its operating profits after deducting
taxes. According to this indicator QUALCOMM Incorporated's $92.83 billion valuation is reasonable at 14.10
times its most recent quarterly net income plus depreciation.

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 September 19, 2016

QUALCOMM Incorporated
NASD: QCOM - Telecommunications Equipment 58.3
Profitability Grades Are Solid, Indicating the Company's Business Is
Profitability B+ Strong and Healthy
While most of QUALCOMM Incorporated's profitability indicators are
Asset Utilization A-
positive, the returns on shareholder equity recently posted by the
company--an important MarketGrader indicator--are weak and a cause for
Capital Utilization C
caution. This is despite operating margins that exceed its industry
Operating Margins average and the $5.17 billion of net profit booked by the company in the
A-
last 12 months, equivalent to 22.64% of total revenue for the period, an
Relative Margins A+
outstanding net profit margin. The average operating margin for the
Telecommunications Equipment industry was 10.74% during the same
Return on Equity C
period, 138.32% below the company's 26.75%. QUALCOMM
Incorporated's return on equity deteriorated significantly during the last
Quality of Revenues B-
twelve months to 16.86% from the year earlier period's 18.38%. Although
the most recent value is still acceptable, it underscores a worrisome trend in an indicator MarketGrader considers
very important in measuring the company's management's efficiency.
This mild slowdown doesn't pose any immediate threats to the health of the company's capital structure, which is
very conservatively managed. Its total debt is equal to less than half the firm's total equity, including long term
debt that accounts for 24.65% of total capital. QUALCOMM Incorporated's core earnings have shown a
significant slowdown in the company's business based on twelve month trailing EBITDA of $8.76 billion. This
represents a 15.57% decline from the same period ended a year earlier in which the company's core operations
generated $10.37 billion. EBITDA is used as a measure of earnings power because it includes non-operating
charges like interest expenses, income taxes and depreciation and amortization, which aren't even cash
expenses. All of these are included in several areas of our analysis that look at EPS and net income.

Company's Management of its Cash Flow Appears Very Sound but

Cash Flow B+ Could Improve in a Few Areas
QUALCOMM Incorporated's cash flow declined significantly last quarter
Cash Flow Growth F
to $1.84 billion, 13.04% lower than the year earlier quarterly cash flow of
$2.12 billion. What's more important and worth highlighting is the fact that
EBIDTA Margin B+
up to the most recent quarter the company's twelve month trailing cash
Debt/Cash Flow Ratio flow was growing very healthily, up 28.65% compared to the same period
A+
ended a year before. This marks a sharp slowdown in the company's
Interest Cov. Capacity A+
business environment and is likely to put considerable pressure on its
margins. Even though the company has $11.77 billion in total debt, its net Cash Flow Qtrly. 06/30/2016 $1.8B
Economic Value B-
debt is virtually zero since it has $17.11 billion in cash on hand; and since
Cash Flow Qtrly Year Ago $2.1B
it generated $2.31 billion in earnings before interest, taxes, depreciation
Retention Rate A+
and amortization last quarter, it's safe to say its liquidity is remarkable. Cash Flow 1 Yr. Chg. (13.04%)
Cash Flow 12 Mo. Tr. Latest $7B
Therefore the company's debt is not only very manageable with its own cash flow but could be increased if it
wanted to pursue strategic growth opportunities. The company also has the ability to enhance shareholder returns Cash Flow 12 Mo. Tr. 3Y Ago $7.7B
through dividends or by repurchasing its own shares, boosting the future value of its earnings. The current Cash Flow 12 Mo. Tr. 3Y Chg. (8.82%)
amount of cash on hand in its balance sheet is actually 19.96% lower than a year ago when it had $21.38 billion, Free Cash Flow Last Qtr. $1.7B
yet it is enough to exceed its leverage, which actually increased from last year with total debt as a percentage of
total capital going from 24.74% to 27.75% today.
MarketGrader's Economic Value indicator looks at the company's returns on invested capital after measuring the Economic Value
cost of obtaining it and of keeping investors' capital tied up in its business. In this case, QUALCOMM Incorporated Total Invested Capital $42.4B
had $40.67 billion in invested capital as of its most recently reported quarter, on which it generated a 15.01% Return on Inv. Capital 15.01%
return based on 12-month trailing operating income. Its total after tax cost of capital was 8.26% during the same Weighted Cost of Equity 7.77%
period, most of it associated with its weighted cost of equity, which was 7.77% vs. its 0.49% weighted cost of Weighted Cost of Debt 0.49%
debt. Deducting these costs from the total return on investment translates into QUALCOMM Incorporated's Total Cost of Capital 8.26%
economic value added (EVA) of 6.75%. While not outstanding, this represents and acceptable true economic Economic Value Added 6.75%
profit after accounting for both operating and capital costs. The company increased its quarterly common
dividend on December 31, 2015 by 10.42%, to 53.00 cents a share from 48.00 cents. It has paid a dividend for at
least 18 years and, based on this latest payout, the stock is currently yielding 3.21%. QUALCOMM Incorporated
paid out a total of $2.95 billion in common dividends during the last 12 months (ended last reported quarter),
which accounted for 42.09% of its cash flow and 57.02% of what it earned in the period after taxes. This payout
was slightly lower than what it paid out during the 12 months ended just a quarter earlier, or 59.55% of total
earnings. Combined with the company's generally healthy fundamentals, the recent reduction alleviates concerns
about the company's outlays growing faster than its cash flow, which could damage its balance sheet and
contribute to lower overall grades.

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 September 19, 2016

QUALCOMM Incorporated
NASD: QCOM - Telecommunications Equipment 58.3
Profile
QUALCOMM, Inc. develops, designs, manufactures and markets digital telecommunications Key Facts:
products and services. It also supplies integrated circuits and system software based on code 5775 Morehouse Drive
division multiple access, orthogonal frequency division multiple access and other technologies for San Diego ,CA 92121-1714
use in voice and data communications, networking, application processing, multimedia and global Phone:
www.qualcomm.com
positioning system products to device and infrastructure manufacturers. The company sells
equipment, software and services to transportation and other companies to wirelessly connect their
assets and workforce. It operates through four segments: Qualcomm CDMA Technologies, Biggest Company in Sub-Industry
Qualcomm Technology Licensing, Qualcomm Wireless & Internet, and Qualcomm Strategic Apple Inc. (AAPL)
Initiatives. The Qualcomm CDMA Technologies segment develops and supplies integrated circuits Grade 76.7
and system software based on CDMA, OFDMA and other technologies for use in voice and data Market Cap:$619.24 billion
communications, networking, application processing, multimedia and global positioning system
products. The Qualcomm Technology Licensing segment provides rights to use portions of the
company's intellectual property portfolio, which includes certain patent rights essential to and/or Smallest Company in Sub-Industry
useful in the manufacture and sale of certain wireless products, including, without limitation, products xG Technology, Inc. (XGTI)
implementing CDMA2000, WCDMA, CDMA TDD, GSM/GPRS/EDGE and OFDMA standards and Grade 20.8
their derivatives. The Qualcomm Wireless and Internet segment consists of four divisions: Qualcomm Market Cap:$2.78 million
Internet Services, Qualcomm Enterprise Services, Qualcomm Government Technologies, and
Firethorn. The Qualcomm Enterprise Services division provides fleet management, satellite- and
terrestrial-based two-way wireless information and position reporting and other services, software
and hardware to transportation and logistics companies. The Qualcomm Internet Services division
offers content enablement services for the wireless industry and push-to-talk and other software
products and services for wireless network operators. The Qualcomm Government Technologies
division provides development and other services and related products involving wireless
communications technologies to government agencies and their co
MarketGrader Dilution Analysis Income Last Qtr 12 Mo.
Statement (06/2016) Trailing
Impact of Change in Shares on EPS - Q3 2016
Dilution Summary Revenue $6.0B $22.8B
*EPS Latest $0.97 Op. Income $1.7B $6.1B
*EPS Year Ago $0.73
Net Income $1.4B $5.2B
EPS Change 1 Yr. 34%
*EPS $0.97 0
C. Shares - Latest(M) 1,486
C. Shares - Yr Ago(M) 1,629 *Earnings per share are based on fully diluted net income per share
excluding extrodinary items. This number may not match the
C. Shares - 1Yr Chg. (9%) headline number reported by the company.

EPS if Yr. Ago Shares $0.89

EPS Chg. if Yr. Ago 22%
EPS Loss from Dilution $0.09
Balance Sheet Latest

Total Assets $50.8B

*Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company.

Total Debt $11.8B

Stockholders Eq. $30.6B

All numbers in millions except EPS

Ratios
Price/Earnings (12 mo. trailing) 18.47

Price/Tangible Book 6.92

Price/Cash Flow 13.37

Price/Sales 4.06

Debt/Cash Flow 168.19

Return on Equity 16.86%

Gross Margin (12 mo. trailing) 59.71%

Operating Margin (12 mo. trailing) 26.75%

Total Assets $50.8B '11 '12 '13 '14 '15 '16
Net Profit Margin (12 mo. trailing) 22.64%
Intangible Assets $17.1B Qtr 1 0.22 0.25 0.35 0.42 0.48 0.53
Long Term Debt $10.0B Qtr 2 0.22 0.25 0.35 0.42 0.48 0.53
Total Debt $11.8B Qtr 3 0.22 0.25 0.35 0.42 0.48
Book Value $30.6B Qtr 4 0.22 0.25 0.35 0.42 0.48
Enterprise Value ($5.3B)

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 September 19, 2016

QUALCOMM Incorporated
NASD: QCOM - Telecommunications Equipment 58.3
Top Down Analysis
# Ticker Grade Sentiment Name Price Next EPS
1 NTIP 88.13 N Network-1 Technologies, Inc. $2.70 11/14/2016
Technology 2 UBNT 87.65 Ubiquiti Networks, Inc. $52.50 11/03/2016
P

Stocks in Sector: 806 3 SVC.CA 87.61 N Sandvine Corporation $2.93 10/06/2016

Buys: 120 (14.89%) 4 TSEM 85.05 P Tower Semiconductor Ltd $15.10 11/10/2016
Holds: 110 (13.65%)
Sells: 576 (71.46%) 5 ATHM 85.03 N Autohome, Inc. Sponsored ADR Class A $23.49 11/03/2016
6 NTES 82.44 P NetEase, Inc. Sponsored ADR $238.03 11/09/2016
No. of stocks at:
7 SILC 82.14 P Silicom Ltd. $40.27 10/24/2016
52-Wk. High: 36
52-Wk. Low: 25 8 GOOGL 81.59 P Alphabet Inc. Class A $797.97 10/20/2016
Above 50 & 200-day MA: 397 9 NII.CA 80.16 P Norsat International Inc. $8.39 11/02/2016
Below 50 & 200-day MA: 217
10 VCM.CA 79.58 N Vecima Networks Inc. $9.60 09/22/2016
140 QCOM 58.33 P QUALCOMM Incorporated $62.99 11/02/2016

# Ticker Grade Sentiment Name Price Next EPS

1 UBNT 87.65 P Ubiquiti Networks, Inc. $52.50 11/03/2016
Telecommunications
Equipment 2 VCM.CA 79.58 N Vecima Networks Inc. $9.60 09/22/2016
Stocks in Sub-Industry: 67 3 AAPL 76.70 P Apple Inc. $114.92 10/24/2016
Buys: 4 (5.97%)
4 IDCC 68.08 P InterDigital, Inc. $75.31 10/27/2016
Holds: 11 (16.42%)
Sells: 52 (77.61%) 5 GRMN 59.40 P Garmin Ltd. $47.23 10/26/2016
6 TNC.CA 58.99 N TIO Networks Corp. $2.15 11/22/2016
No. of stocks at:
52-Wk. High: 3 7 QCOM 58.33 P QUALCOMM Incorporated $62.99 11/02/2016
52-Wk. Low: 2 8 RWC 57.50 N RELM Wireless Corporation $5.56 11/09/2016
Above 50 & 200-day MA: 33
9 MDA.CA 54.40 N MacDonald, Dettwiler and Associates Ltd. $82.15 10/26/2016
Below 50 & 200-day MA: 21
10 WIN.CA 53.04 N Wi-LAN Inc. $2.12 11/02/2016

1. Price Trend. A+ 2. Price Momentum. B

8.9
3. Earnings Guidance. B+ 4. Short Interest. A+

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