Here's What Skyworks' Earnings Mean for Qualcomm and Apple
Skyworks
* Qualcomm reports after today's market close, and March quarter revenue expectations may be a bit aggressive
* Should Qualcomm issue downside guidance relative to expectations, it could give us room to add more shares.
* March quarter guidance from Skyworks calls for normal seasonal mobile declines, down 10%-15% QoQ
Ahead of quarterly results after today's market close from Action Alerts PLUS names Qualcomm (QCOM) and Apple's (AAPL) due after Thursday's market close, RF chip company Skyworks (SWKS) , which counts Apple as its largest customer, delivered December quarter revenue that matched consensus expectations.
In issuing its outlook for the current quarter that sees its top line falling 10%-15% to $1.02-$1.07B compared to $1.2 billion posted in the December quarter, management expects its mobile business to repeat the seasonal decline but also commented the Android market has finally returned to normalized inventory levels.
Skyworks also commented it is seeing a stabilization in consumer IoT markets, with signs of improving demand, and continued connectivity gains in automotive and industrial applications. Those comments are constructive for Qualcomm's results and guidance, but leading into them, the market consensus only sees Qualcomm's current quarter falling to low single digits compared to the larger drop expected by Skyworks.
Even though Qualcomm has extended its relationship with Apple, we could see QCOM deliver downside revenue guidance. The current market consensus puts current quarter revenue at $9.3 billion compared to $9.52 billion for the December quarter. Based on the market's reception to anything less than a pristine quarterly report and guidance, if Qualcomm's guidance disappoints similar to what AMD (AMD) did last night, we are likely to see them head lower in response.
That risk has us watching the first layer of technical support for the shares at $139, which is the 50-day moving average and is followed by further support at $125-$126. We are near a full position in QCOM shares, but a post-earnings pullback could give us some extra wiggle room to pick up additional shares.
For Apple, we will want to triangulate Skyworks' earnings report with Qualcomm's, and that combination should give us a better sense of iPhone volumes in the current quarter before Apple reports after Thursday's market close.
Action Alerts PLUS is long QCOM, AAPL.