Stocks opened lower Wednesday and drifted sideways most of the session, with little news on trade to move the market. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) posted modest losses.
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As for individual stocks, investors had thought that it would be smooth sailing for Qualcomm (NASDAQ:QCOM) after it settled its fight with Apple last month, but a new court ruling put a cloud over the chipmaker once again. Elsewhere, Target (NYSE:TGT) reported strong first-quarter sales.
Court judgment puts Qualcomm in a world of pain
A district court judge threw the book at Qualcomm, finding in favor of the Federal Trade Commission (FTC) in its lawsuit against the company for anticompetitive practices and requiring Qualcomm to tear up its existing license agreements for the technology in its modem chips. The stock tumbled 10.9%.
U.S. District Judge Lucy Koh found that Qualcomm used monopoly power to engage in a "wide variety of anticompetitive acts" against the buyers of its chips. The court ordered that the company can no longer condition the supply of modem chips on a customer's patent license status, and that all such contracts need to be rewritten. The ruling also specifies that Qualcomm can't enter into any exclusive supply agreements for the chips, explicitly calling out the deal the company made with Apple. The chipmaker is required to submit to compliance monitoring by the FTC for seven years.
Qualcomm will immediately seek a stay of the judgment and appeal the ruling, which undercuts the company's fundamental business model. General Counsel Don Rosenberg said in a press release, "We strongly disagree with the judge's conclusions, her interpretation of the facts and her application of the law."
Same-day fulfillment services power Target's sales
Retailer Target brushed off challenges from weather and tariffs, reporting strong first-quarter sales gains helped by investments in digital fulfillment. Revenue grew 5% to $17.6 billion, exceeding analyst expectations, and earnings per share increased 15.4% to $1.53, $0.01 above the top end of the company's guidance. Shares jumped 7.8%.
Comparable sales grew 4.8%, marking the eighth straight quarter of comp growth, with traffic increasing 4.3% and the average transaction up 0.5%. Brick-and-mortar stores had 2.7% sales growth, while comparable digital sales were up a whopping 42%. Operating income margin improved 20 basis points to 6.4%.
Target is benefiting from its same-day digital fulfillment services, which accounted for over half of the digital sales growth. The same-day fulfillment options of in-store pickup, Drive-Up, and Shipt drove over a quarter of the company's total comp growth in the period, showing that worries about the threat of Amazon's expanding one-day service may be overblown.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jim Crumly owns shares of AMZN, AAPL, and Target. The Motley Fool owns shares of and recommends AMZN and AAPL. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.