There are good days and bad days to report earnings. A poor report before or after a good day in the market may soften the blow of an investor's response. And a poor earnings report on a bad day may increase the damage inflicted on the issue.
That is the predicament QUALCOMM, Inc. (NASDAQ:QCOM) shareholders face Thursday. The price action following its fourth-quarter report makes Qualcomm the PreMarket Prep Stock of the Day.
Wall Of Resistance: Ahead of an earnings report, some investors in an issue will attempt to exit or reduce their position ahead of the print. Preferably, the sellers will be selling into strength to lessen the downside pressure on the issue.
There is no doubt the $120 area was targeted by Qualcomm shareholders ahead of the report. In fact, over the last seven sessions, five of the daily highs came in a narrow range ($119.45-$120.74), with traders perhaps striving for $120 to be the average price on the exit.
Qualcomm Posts Inline Q4, Lower Guidance: After Wednesday’s Fed-induced rout in the market, Qualcomm announced inline fourth-quarter EPS of $3.13. The company had a slight beat for sales, reporting $11.39 billion against an $11.37-billion estimate.
The company slashed guidance for first-quarter adjusted EPS to $2.25-$2.45 vs. a $3.42 estimate and sales to $9.2 billion-$10 billion vs. a $12.02-billion estimate.
PreMarket Prep's Take: While Qualcomm was being covered on the show Thursday, it was already trading lower by $9 at the $103 area.
“It is a value stock with a low price-to-earnings ratio,” said co-host Dennis Dick, a longtime Qualcomm shareholder.
“I took off half of the position after it doubled at $125, but would be interested in buying under $100,” he said.
Qualcomm is a stock that investors may want to consider buying on the dip, Dick said.
The author of this article noted the importance of getting back above and holding the low for the move at $104.66.
Qualcomm is an issue that trades with significant volume, and this author said it may be prudent to allow the issue to make a series of lows in the same area. The reason: the tightly grouped lows can be a sign that bigger players are attempting to purchase shares at a specific level.
QCOM Price Action: After a much lower open ($104.38 vs, $112,50), Qualcomm immediately flushed to $102 and reversed course. As of 12:45 p.m. EST, the ensuing rally took the issue above the former low of the move to $105.57.
The stock was trading in the $105 area, down 6.5%, ahead of the close.
The discussion on the issue from Thursday’s show can be found here:
Photo via Shutterstock.
