Qualcomm Q1 earnings preview: Focus will be on Apple lawsuit and FTC trial outcome

It’s been a tough Monday for semiconductor stocks after Nvidia (NVDA) cut down its Q4 revenue outlook and Qualcomm (QCOM) was one among the hardest hit chipmakers in the Philadelphia Semiconductor Index today.

Shares of Qualcomm, which hit a 52-week low ($48.56) in April 2018, plunged to day’s low ($50.24) and ended Monday’s regular trading session at $50.64, down 1.29%. The stock was further down about 0.5% during the after-market hours. On this background, Qualcomm is set to report its first quarter 2019 earnings on January 30, Wednesday after the market close.

Here is a quick look at Qualcomm’s fourth quarter 2018 results.

For the last reported quarter, Qualcomm beat both bottom line and topline estimates. However, the stock fell after the earnings report as the company guided weaker-than-expected revenue for the first quarter of 2019. Revenue and EPS both fell 2% compared to the fourth quarter of 2017. The company had guided Q1 GAAP EPS to be $0.78-0.88, non-GAAP EPS to be $1.05-1.15 and revenue to be in the range of $4.5 billion to $5.3 billion.

Qualcomm’s legal battle with Apple (APPL), which started in 2017, continues to be a never-ending story. Apple had accused Qualcomm that it is overpaying as license fees to the latter. Last year, Apple diverted its microprocessor orders to Intel (INTC) from Qualcomm.

In December 2018, Qualcomm secured a ban in Germany on the sale of some older versions of iPhones. However, Qualcomm had said during the last quarter reporting that it wants to settle the dispute with Apple.

Qualcomm also faces an antitrust trial in California Federal Court that was filed by US Federal Trade Commission (FTC), which accused that Qualcomm had forced Apple to pay excessive license fees for using its chips in the iPhones.

It’s also worth noting that Apple COO Jeff Williams testified in the FTC trial that Qualcomm was not ready to supply 4G LTE processors for the production of new iPhones because of the legal battle between the two companies.

Qualcomm had expected growth in the China business, particularly in the second half of fiscal 2019. Contrary to this, Apple and Nvidia had lowered their outlook, citing the macroeconomic conditions in China.

It’s worth noting that when Lam Research (LRCX), Texas Instruments (TXN), Xilinx (XLNX) and Teradyne (TER) reported better-than-expected quarterly results on Wednesday, all the stocks in the Philadelphia Semiconductor Index traded in the positive territory on Thursday, except Qualcomm.

If the San Diego, California-based company is not reporting convincing results for its first quarter, the stock might plunge to a new yearly low on Thursday. Qualcomm stock had dropped 19% in the last three months and 11% so far this year.

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