What To Watch In Qualcomm Earnings Report

Qualcomm (QCOM) is scheduled to report results of its fiscal second quarter after the market closes on April 28 with a conference call scheduled for 4:45 pm ET. What to watch for:

1. CONSENSUS MOVES HIGHER: Along with its last report, Qualcomm guided for Q2 earnings per share in the range of $1.55-$1.75 on revenue of $7.2B-$8B. At the time, analysts were expecting the company to report Q2 EPS of $1.57 on revenue of $7.1B, but those figures have since risen to $1.67 and $7.62B, respectively.

2. DOWNGRADES: Earlier this month, Evercore ISI analyst C.J. Muse downgraded Qualcomm to In Line from Outperform and cut his price target on the shares to $150 from $195. Muse said at the time that he believes that "the lion's share" of the 5G smartphone upcycle is priced into the stock. Looking ahead, the analyst sees sentiment on Qualcomm related to Apple (AAPL) turning from 5G design win to potential insourcing. Muse added that he sees increasing competitive pressure from Mediatek, Samsung (SSNLF), and internal silicon.

Later in the month, Susquehanna analyst Christopher Rolland downgraded Qualcomm to Neutral from Positive and cut his price target to $155 from $175. Rolland said that as valuation multiples and lead times expand in concert, he believes enough risk has accumulated to compel a downgrade.

3. FTC: In late March, the Federal Trade Commission decided that it would not petition the U.S. Supreme Court for review of their case against Qualcomm, which alleged that the chipmaker engaged in illegal monopolization. Commenting on the decision, the FTC's Acting Chairwoman Rebecca Kelly Slaughter said, "Given the significant headwinds facing the Commission in this matter, the FTC will not petition the Supreme Court to review the decision of the Court of Appeals for the Ninth Circuit in FTC v. Qualcomm. The FTC's staff did an exceptional job presenting the case, and I continue to believe that the district court's conclusion that Qualcomm violated the antitrust laws was entirely correct and that the court of appeals erred in concluding otherwise. Now more than ever, the FTC and other law enforcement agencies need to boldly enforce the antitrust laws to guard against abusive behavior by dominant firms, including in high-technology markets and those that involve intellectual property. I am particularly concerned about the potential for anticompetitive or unfair behavior in the context of standard-setting and the FTC will closely monitor conduct in this arena."

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