For Qualcomm, It's What's Outside That Counts: Business Dynamics Overshadowed By Apple Litigation, NXP Merger

Qualcomm is scheduled to report its September quarter results after the market close Wednesday.

As such, Bernstein has a Market Perform rating and a $50 price target for the shares.

At publication, shares of Qualcomm were down 6.7 percent at $51.

Delving on the external factors, analyst Stacy Rasgon noted that the Apple Inc. AAPL dispute seems to be intensifying. Referring to a Wall Street Journal article, the analyst said baseband losses may amplify next year, with Apple potentially planning to exclude Qualcomm from its products.

The analyst also said other various customer and regulatory issues will likely remain overhangs. Also, the analyst thinks Qualcomm will face incremental pressure on NXP Semiconductors NV NXPI, with the likelihood of a higher price needed to take it to close.

See also: 9 And Counting: Qualcomm's NXP Buyout Offer Deadline Extensions Could Continue

Concerning fiscal-year fourth-quarter expectations, Bernstein expects revenues of $5.801 billion and earnings per share of 80 cents for the quarter compared to the consensus estimates, which call for revenues of $5.80 billion and earnings per share of 81 cents. The firm clarified that it is slightly above consensus on QCT but below consensus on QTL.

The firm also said it is above the Street on the December quarter, although expecting uncertainty around the iPhone 8/X cycle to drive some near-term volatility. However, the firm thinks the Street numbers for standalone Qualcomm remain high.

The firm models 2018 earnings per share estimate of $3.27, below the consensus estimate of $3.59.

"The stock appears inexpensive with NXPI, but we believe overhangs will continue to persist for some time, and we believe the shares appear to price in negative, but not necessarily egregious, scenarios," the firm added.

Therefore, the firm said it remains on the sidelines on Qualcomm.