The PHLX Semiconductor Index has been on fire this year, and it climbed to a 16-month high in March. But despite the underlying strength, one of the biggest names in the sector has continued to struggle. Qualcomm, Inc. (NASDAQ:QCOM) is currently sitting just pennies above a nine-month low, and the company’s first-quarter earnings release on Wednesday afternoon will play a large role in determining where QCOM stock heads next.
As the market took off in the post-election rally, Qualcomm failed to join in the party. Trading was relatively flat, but then news came out in mid-January that the company was being sued by Apple Inc. (NASDAQ:AAPL) concerning $1 billion in potentially withheld rebates.
It’s never a good thing when the largest company in the world is suing you, and the shares took a big hit as a result.
QCOM stock seemed to stabilize and bounce off its lows, but after briefly reclaiming its 50-day moving average (the blue line) the shares are back near what has turned out to be very important support at $52. Now, it may all come down to earnings.
Qualcomm has had a very solid track record over the last two years, beating the Street in each of the past eight quarters. Analysts are looking for earnings of $1.19 a share and revenue $5.9 billion in the first quarter. If history is any indication, we’ll likely see another beat.
It’s safe to assume that a better-than-expected number would act as a catalyst for a quick pop in the shares, but any piece of negative news could push QCOM stock below that key $52 level.
If that’s the case, I suspect the next three months will be tough.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.