From Briefing.com: There were no yahoos heard Thursday over the sight of another tech sector rally. If anything, there were a bunch of yoo-hoos, as in, "yoo-hoo, maybe it's time to take some money off the table seeing how Yahoo! (YHOO 32.56 -2.73) failed to deliver the upside guidance that was expected of it." Whatever the exclamation may have been, it was clear that buyers were few and far between on Thursday as the tech sector, and the broader market, started on a down note and moved lower throughout the day.
Unlike many of the sessions seen of late, participants were reluctant to buy on the dip as concerns about valuation finally prevailed. The lack of upside guidance from Yahoo!, a disappointing initial claims report, and an uninspiring batch of same-store sales results succeeded in bringing valuation concerns to the forefront as those items failed to validate the very rosy expectations surrounding recovery prospects that have been built into stock prices.
Fittingly, the selling activity was widespread on Thursday, but there certainly weren't any signs of panic as the decline was orderly in nature while volume at the NYSE (1.44 bln) and the Nasdaq (1.75 bln) was moderate, with Nasdaq volume the lowest it has been all week. What one can interpret from that is that Thursday was indeed just a day of profit taking. Notice was served, however, that earnings guidance can't fall shy of expectations; the expectation at this juncture is that guidance will be better than just in-line.
To that end, Juniper Networks (JNPR 14.11 -0.76) reported slightly better than expected top- and bottom-line results for Q2 (Jun) after Thursday's close. Although the sales and EPS guidance it provided for Q3 (Sep) of $165 mln and $0.03, respectively, was slighty ahead of the current Reuters Research consensus estimates, the market, apparently, didn't find much to be excited about, recognizing that the guidance is essentially flat with the quarter just completed. Yoo-hoo... JNPR, which trades at 176.4x est. FY03 earnings, was down close to 5.0% following the report.-- Patrick J. O'Hare, Briefing.com
7:03PM After Market Movers : Trading higher in extended-hours action are shares of SONS (+11.33%) and EPIX (+8.17%). Losing ground in reaction to earnings / guidance are PLUM (-8.98%), ANEN (-8.33%), DSS (-8.02%), JNPR (-4.13%) and PWAV (-3.40%).
3:35PM General Electric Earnings Preview (GE) 28.08 -0.30: General Electric reports Q2 results tomorrow morning before the open, with consensus ests standing at $0.38 in EPS and $32.2 bln in sales. Bernstein believes that the co will report $0.37, which will leave a backend-weighted second half to get to their full-year est of $1.59; firm expects poor performances in Plastics and Consumer Products to be offset by strength in GE Capital and NBC, and expects the co to narrow its EPS guidance range fairly substantially, from $1.55-$1.70 to a range more like $1.56-$1.62. Banc of America says that Q2 appears to have come in on plan, with NBC and Power slightly stronger than expected and Plastics and Equipment Mgmt slightly worse.
11:06AM Ratings Briefing - MU : When looking at a stock, an investor who doesn't want to get caught up in hedging strategies, really has only three options: buy, sell, or hold. If you are a UBS client, and have an interest in Micron (MU 13.95 -0.45), each of those options has applied. Now, that isn't unusual in the grand scheme of things as analysts make ratings changes from time-to-time. In the case of Micron, however, the analyst at UBS has essentially issued each directive in the past six weeks.
Today, the directive is to buy, as MU was upgraded from Neutral 2 to Buy 2. According to UBS, a Neutral 2 designation means there is "excess return potential between -15% and 15%, larger range around the price target;" meanwhile, Buy 2 denotes that there is "excess return potential greater than 15%, larger range around the price target." The firm's 12-month price target was bumped up to $18 from $12.
The change in rating came in conjunction with the new UBS Global DRAM opinion and is based on three primary factors: (1) likelihood of continued strong pricing for 2H03, (2) probability of better supply-demand dynamics in 2H03 and throughout much of 2004 and (3) potential margin and earnings upside from the ramp of more efficient 100nm process technology.
On May 23, UBS downgraded MU to Reduce 2 from Neutral 2. It was said then that the firm adjusted its view to factor in higher bit shipments, lower per-bit costs (from the ramp of the 110nm mode), offset by lower long-term ASP trends in a market that should be roughly in supply-demand balance in 2004. Also, UBS added that MU would likely build inventory in the near-term and that it saw no serious catalysts for pricing improvements in the near-term. At the time, shares of MU were trading at $10.03.
Yesterday, MU hit an intra-day high of $14.73, which translates to a 47% gain since UBS issued its Reduce 2 rating. On June 19, UBS did upgrade MU, but only to Neutral 2. Granted, MU's performance matched the definition of the latter rating in the interim, but the ratings change came a bit late, which diminishes the value of today's upgrade to Buy 2. Then again, as we pointed out in our review of UBS's ratings change on May 23, the firm didn't have a very good ratings track record on this particular stock. That track record, we said, suggested the call may be of greater value from a contrarian standpoint and the market's subsequent response indicated as much.
It is almost apropos, then, that MU is trading down today in the wake of the UBS upgrade. However, that may be largely due to the fact that there is a report this morning that Texas Instruments (TXN 19.05 -0.44) recently sold 24.7 mln shares of MU. Whatever the case may be, the UBS call isn't holding much sway as it is clear the firm's ratings compass on MU has provided its share of false readings.-- Patrick J. O'Hare, Briefing.com
11:05AM Metrologic Inst announces 1.5 mln share public offering, CEO to sell shares (MTLG) 37.28 -1.78: Announces that it intends to offer up to 1.5 mln newly issued shares of common stock; in addition, CEO C. Harry Knowles intends to offer up to 200k shares of currently issued and outstanding common stock, and up to 300k shares of currently issued and outstanding common stock are expected to be offered for the benefit of the Knowles Science Teaching Foundation. There will be an over-allotment option of 15% of the number of shares offered.
10:39AM Cree receives SEC information request (CREE) 17.02 -1.74: In an 8-K filing, co confirms that the SEC recently has requested that it provide information in response to an informal inquiry. CREE also announced that on July 9 it filed an opposition to the motion for preliminary injunction filed by Eric Hunter and his wife asking the court to enjoin alleged conduct constituting harassment. Cree asked the court to deny the motion for preliminary injunction and set a hearing on the request.
10:34AM BRCM -- negative chatter in market regarding a Sony/Ericsson order 28.08 -0.96:
10:26AM BRCM -- Broadcom reit Hold at Legg Mason 28.10 -0.94: Legg Mason reiterating its Hold rating on Broadcom (BRCM) following announcement last night that co has discovered another problem with one of its Grand Champion chipsets from its ServerWorks division. While Broadcom does not officially expect any specific material financial impact from this issue, Legg Mason believes there could be broader implications. With two significant Grand Champion issues in four months, firm believes that customers will at least have to make a more concerted consideration of diversifying its supplier base.
9:45AM Vitesse Semi target raised to $8 at Wedbush Morgan (VTSS) 6.52 -0.09: Firm raises price target to $8 from $5.50 reflecting greater confidence in better end-markets for co's storage, enterprise and service provider businesses. Notes that recent surveys of IT spending indications have indicated a more positive tone for the second half of 2003 and 2004. Additionally, Seagate (STX) has signaled a strong demand for enterprise hard disk drives.
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