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

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!