Qualcomm Inc. (NASDAQ: QCOM) is scheduled to release its fiscal third-quarter results after the markets close on Wednesday. The consensus estimates are calling for $0.75 in earnings per share (EPS) and $5.08 billion in revenue. The same period of last year reportedly had $1.01 in EPS and $5.63 billion in revenue.
During the quarter, Qualcomm and Apple Inc. (NASDAQ: AAPL) announced a settlement in the long-running dispute between the two companies over Qualcomm’s licensing fees for its modem chips. The settlement would have been worth between $4.5 billion and $4.7 billion to Qualcomm.
The ruling by Judge Lucy Koh in U.S. District Court may provide Apple an opportunity to avoid that cash penalty. In her ruling on a case brought against Qualcomm in 2017 by the U.S. Federal Trade Commission (FTC), Judge Koh ruled that the company had illegally suppressed competition in the cell phone chip market and used its market dominance to charge excessive licensing fees for its technology.
Qualcomm must stop threatening to cut off chip supplies to customers that refuse to pay the company’s licensing fee even when the customer uses a chipset from another supplier. In other words, once a customer used a Qualcomm chip the customer was locked into an agreement to continue to pay Qualcomm a licensing fee forever.
Judge Koh ruled that Qualcomm must reach or revise agreements with existing customers without using the same anti-competitive practices. The company also must license its patents to rivals at fair, reasonable and non-discriminatory (known in the industry as FRAND) prices.
Overall, Qualcomm has outperformed the broad markets with its stock up about 31% year to date. In the past 52 weeks, the stock is up closer to 19%.
A few analysts weighed in on Qualcomm ahead of the report:
- RBC has a Sector Perform rating and a $79 price target.
- Daiwa Capital Markets has a Neutral rating.
- Barclays has an Equal Weight rating with a $75 target.
- Macquarie rates it at Buy with a $90 price target.
- Merrill Lynch has a Buy rating and a $105 price target.
- CFRA’s Buy rating comes with an $80 target price.
- Deutsche Bank has a Hold rating and a $74 price target.
Shares of Qualcomm traded at $75.15 on Wednesday, in a 52-week range of $49.10 to $90.34. The consensus price target is $86.51.