QUALCOMM, Inc. (NASDAQ:QCOM): Becoming A Core Holding?

QUALCOMM, Inc. (NASDAQ:QCOM) stands out as one of the few green stocks today. The NASDAQ 100 member was upgraded by Citi. Analyst Ehud Gelblum believes the QCOM is a "Buy" today, up from yesterday's "Neutral," and put a fresh price target of $88 on QCOM as the company begins its relationship with China Mobile.

QUALCOMM Incorporated designs, develops, manufactures, and markets digital telecommunications products and services – essentially, they make chips so that your wireless devices work faster.

Gelblum tells clients, "We believe the complexity of LTE is accelerating with new major technologies being added to the standard continuously – from carrier aggregation and envelope tracking last year to TDD and FDD, WiFi integration, small cells and LTE in unlicensed bands in 2014 – allowing QCOM's outsized R&D budget and 2-yr head start in LTE to put even more distance between itself and competitors."

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To justify his new opinion, "Qualcomm should continue to benefit from the global 4G LTE adoption cycle as 175M or just 3% of the total worldwide wireless subs should be on LTE by YE'13, per the GSMA, a number we expect to be north of 40% by 2018. LTE subs should grow at a staggering 55% CAGR through 2019 while 3G subs should grow to 52% of the total from just 24% today as 2G, where QCOM earns no revenue, continues to shrink. We calculate this remaining 2G to 3G/4G conversion opportunity is conservatively worth $7B to topline and $2.00 to EPS."

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Let's take a look at what an additional $7 billion in revenue and $2.00 in EPS could mean for QCOM's shares.

In the last five-years, the semiconductor company was valued from 4.84 to 8.42 times sales (P/S) with an average of 6.15. An additional $7 billion in revenue by 2019 could mean QUALCOMM shares would tack on $20.05 using the five-year low P/S ratio, $34.88 with the half-decade high ! P/S ratio, or $25.48 with the average price-to-sales ratio.

We see much stronger numbers when considering the tech company's recent price-to-earnings (P/E) history. Two bucks in earnings would add $31.44 with QCOM's five-year low P/E of 15.72, $49.62 more with the average multiple of $24.81, and a whopping $100.22 using the half-decade high P/E of 50.11.

It's important to remember that Gelblum calls his estimates "conservative," especially considering China Mobile is the country's largest wireless operator.

Overall: QUALCOMM, Inc. (NASDAQ:QCOM) offers compelling upside on a P/S or P/E basis according to Ehud Gelblum's analysis. If his numbers prove to be conservative, then iStock would expect QCOM to trade at or above its historical price-to-earnings and price-to-sales ratios.