Apple Inc. (AAPL), QUALCOMM, Inc. (QCOM): Wednesday’s Top Upgrades (and Downgrades)

Page 1 of 2

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines feature a pair of cuts to price targets at QUALCOMM, Inc. (NASDAQ:QCOM) and Apple Inc. (NASDAQ:AAPL). But the news isn’t all bad, so before we address those two, let’s start on a positive note.

Apple Inc. (NASDAQ:AAPL)

Cliffs Natural Resources Inc (NYSE:CLF) could climb

That has got to hurt. No sooner did Cliffs Natural Resources Inc (NYSE:CLF) CEO announce he’s planning to retire yesterday, than out came an analyst and recommended buying the stock.

Musing that Joseph Carrabba’s exit from the company opens up new directions in which the company could go (spinoffs, going private), one thing BB&T thinks will not happen is a dilutive stock offering — and just removing that risk from the table may allay some investor concerns. Additionally, BB&T notes that iron ore prices appear to be ready to improve in 2014 — which clearly would be a good thing for a company like Cliffs, which sells the stuff.

None of which makes for a good reason to buy Cliffs Natural Resources, however.

Unprofitable today, and priced at close to 10 times the profits that it might earn next year (and might not), Cliffs shares look dangerously overpriced to me. Yes, even though they’ve fallen 64% over the past year, I think there’s still room to the downside. Free cash flow at the company is nonexistent. To the contrary, Cliffs burned through nearly half a billion dollars over the past 12 months, adding to the burden on a balance sheet that’s already $3.4 billion in hock (net of cash).

Long story short, Cliffs’ hole remains deep. It’s going to take more than a departing CEO to piggyback a “buy” thesis on this one.

Now for the actual good news

In contrast, I’m quite a bit more optimistic about a pair of companies that just got their price targets cut at Canaccord Genuity. This morning, Canaccord announced it was reducing price targets on both QUALCOMM, Inc. (NASDAQ:QCOM) and Apple Inc. (NASDAQ:AAPL) — to $84 and $530, respectively. And yet, considering how low both stocks have sunk already, what this really works out to is the potential for Apple to gain 25%, and Qualcomm… 40%!

Needless to say, at the same time as it is ratcheting back its price expectations slightly, Canaccord still recommends “buying” both stocks. Let’s take them one at a time, and see what that’s still really good advice.

QUALCOMM, Inc. (NASDAQ:QCOM)

Priced under 17 times earnings, expected to grow these earnings at 18% per year over the next five years, and paying a 2.3% dividend yield, QUALCOMM, Inc. (NASDAQ:QCOM) looks like a great buy at first glance. A second glance suggests it’s not quite as good a deal as it seems initially. But it’s still plenty cheap.

Over the past 12 months, QUALCOMM, Inc. (NASDAQ:QCOM) generated $5.4 billion in positive free cash flow. That’s about 14% less than it reported for net income. However, Qualcomm’s balance sheet shows that it’s sitting on about $13.5 billion in cash — so if the company’s earnings aren’t quite as robust as they seem, neither is its market cap.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!