From Briefing.com: A surge of buying interest during the final half hour of trading pushed tech shares into positive territory. Monday's trading was thin. Tech shares led the market lower at the open but quickly reversed course, managing to stay above water for most of the morning before dipping into negative territory late in the morning. At the closing bell, theBriefing.com Tech Index was up 0.1%. Advancers led decliners 1.2:1 with advancers rising 1.8% and decliners falling 1.8%. The Philadelphia Semiconductor Index (SOXX 491.08 +1.24) edged up 0.3%. Advancers outpaced decliners 1.3:1 with advancers gaining 4.8% and decliners dropping 3.4%.
After the close, Research In Motion (RIMM 46.10 +1.33) reported Q3 results above consensus and guided for Q4 EPS of $0.30-0.40 on revenue of $195-210MM (+122.9-140.0% Y/Y), significantly ahead of consensus at $0.22 on $158.3MM. The RIMM train is building sales momentum as it expands geographically and into the consumer market. Micron Technology (MU 12.77 +0.44) is scheduled to publish Q1 results after the close on Tuesday.
As noted in the previous General Commentary, trading is likely to be thin, and as a result, volatile ahead of the Christmas and Hannukah holidays. We remain moderately bullish on technology shares over the long-term and would take advantage of the volatility to buy into quality, attractively priced names / sell richly priced shares into strength as part of a rebalancing of the tech portion of the portfolio to a neutral market weight (Please visit the Story Stocks page for the latest thinking on investment opportunities across market sectors, including tech).--Ping Yu, Briefing.com
Group % Change Avg % Change Advancers Avg % Change Decliners Ratio Advancers to Decliners *P/SG Ratio: Advancers *P/SG Ratio: Decliners
Philadelphia Semiconductor Index +0.3% 1.3% -0.7% 1.3:1 4.8 3.4
Briefing.com Tech Index(based on a composite of over 1000 tech companies) +0.1% 2.3% -2.4% 1.2:1 1.8 1.8
Audio & Video Equipment +0.6% 2.5% -1.3% 1.1:1 0.5 0.6
Communications Equipment +0.2% 2.6% -2.1% 1.0:1 1.9 2.0
Communications Services -0.1% 1.7% -2.4% 1.4:1 1.2 1.0
Computer Services +0.3% 2.7% -2.3% 1.1:1 1.8 1.9
Computer Sys & Peripherals -0.5% 2.2% -3.3% 1.0:1 1.4 1.7
Electronic Instruments & Controls +0.3% 2.7% -2.3% 1.1:1 1.4 1.4
Scientific & Technical Instruments -0.2% 2.1% -3.9% 1.6:1 1.6 1.3
Semiconductors +0.1% 2.0% -1.9% 1.0:1 3.0 2.8
Software & Programming +0.1% 2.3% -2.4% 1.2:1 1.9 1.8
4:18PM Micron Technology (MU) 12.79 +0.46: Micron Technology is scheduled to publish Q2 results after the close on Tuesday. Reuters Research prints consensus EPS at ($0.06) on revenue of $1.039B (+51.7% Y/Y) and Q3 at ($0.07) on $975.3MM (+24.2% Y/Y).
Reuters Research Estimates:Estimates Period EPS Consensus EPS Range Revenue Conensus Revenue Range Consensus Y/Y Rev Growth
Current Qtr: Nov -0.06 -0.16-0.04 (21) 1038.65 990.80-1100.00 (17) +51.7%
Next Qtr: Feb -0.07 -0.23-0.09 (19) 975.29 855.80-1106.20 (16) +24.2%
This Year: Aug 04 -0.08 -0.72-0.66 (21) 4223.28 3652.00-4725.80 (22) +7.3%
Next Year: Aug 05 0.83 -0.05-2.46 (14) 5328.73 4044.00-6833.30 (12) +26.2%
Valuation
On an inverted DCF/EVA basis, assuming aggressive balance sheet management and steady Y/Y improvement to 30% operating margin by F07, MU's valuation implies that the company must grow revenue in the low 20% range for the eight years beginning in F06 in order for investors to justify owning shares at current valuation. Consensus Y/Y growth for F04 and F05 is 7.3% and 26.2% respectively.
On a price multiples basis, MU trades at 1.8x F04 revenue of $4.223B (+% Y/Y) and 1.5x F05 revenue of $5.329B (+26.2% Y/Y); 15.4x F05 EPS of $0.83.
Summary
MU shares range from significantly undervalued to fairly valued. We would consider a modest opening position at current level and add on pullbacks for the following reasons:
Addressable market opportunities and strategic alliance with Intel (INTC 30.22 -0.35) support the low 20% long-term growth rate implied by our model.
MU has a highly leveraged and scalable operating model and is positioned to achieve operating margin above the rate implied by our model based on operating performance.
MU's adoption of leading edge processes, including 300mm and copper interconnects, will yield substantial manufacturing efficiencies and cost/performance enhancements over the next two years as sales ramp as a result of a broad-based global recovery/expansion in tech.
MU will achieve substantial SG&A efficiencies as sales ramp, helping the company achieve operating margin as much as 1000-1500 bps above the 30% implied by our model. Assuming MU achieves 40% operating margin, the company will need to grow revenue in the high single-digits (substantially below the expected growth rate for the computing and handheld markets) in order for investors to justify owning shares at current valuation.--Ping Yu, Briefing.com
4:18PM Metrologic Inst guides Q4 higher (MTLG) 25.63 +0.79: Co expects Q4 sales and EPS of of $38.5-$39.5 mln and $0.16-$0.18 vs Reuters Research consensus of $35.9 mln and $0.14.
1:11PM SNDK Color 58.77 -2.22: -- Update -- In the 12:15 comment, we highlighted the defensive trading in SanDisk (SNDK) shares. After checking around, not hearing anything specific that would account for the intraday decline, other than just more profit-taking.
12:47PM Corning, ADC Telecom, Tyco selected by Verizon to supply fiber : Reuters reports that Verizon Communications (VZ) selected Corning (GLW) and three other vendors for its project to wire homes and businesses with high-speed fiber-optic networks. Verizon said Corning, ADC Telecommunications (ADCT), Preformed Line Products Co, and a unit of Tyco will provide fiber-optic cabling and other outside plant equipment.
11:30AM Nasdaq Composite slightly weaker (COMPX) 1944 -6.53: -- Technical -- The index firmed after a weaker start but proved unable to build value above resistance at 1957 (session high 1958) mentioned in The Technical Take with it currently probing its 20 exp avg (hourly chart at 1943) which is a good indicator of intraday and short term trend. Next support is at 1939 (Friday's low) with its 20 day exp/50 simple at 1938/1935. It takes a slide back through 1927 to damage the favorable pattern off the Dec 16 low. Intraday resistances are now at 1948 and 1952/1953 in front of the early high.
10:18AM Nanogen rises on NY Times article (NGEN) 6.10 +0.57: Issue trades up 10% following New York Times story on increasing visibility of the Nanotechnology sector. The article mentions NGEN specifically, after stock more than doubled on the day Pres. Bush signed a law authorizing federal research and development subsidies of $3.7 bln over the four years and NGEN disclosed that it had received a patent for a nanoscale manufacturing method that it said could be used to make advanced microchips and flat-panel displays. However, article points out that it might be just as hard, though, for investors to strike it rich in nanotechnology as it was in the dot-com gold rush. According to article, some of nanotechnology's most promising concepts, like computers that replace silicon transistors with single molecules, are at least a generation away from market.
9:41AM QCOM: China Unicom news a slight positive -- SG Cowen 51.18 +0.15: SG Cowen comments that there are press reports this morning indicate that China Unicom will begin to launch a dual-mode GSM/CDMA 1xRTT service in mid-2004. Firm says China Unicom is the first major carrier worldwide to adopt this technology and the only one firm was aware of that was trialing the technology; views this as a minor positive for QUALCOMM (QCOM). That said, while firm believes CDMA and QUALCOMM will continue to see growth in emerging markets like China and India, firm believes a slower-than expected WCDMA ramp and increased competition from NOK and TXN for CDMA chips will limit EPS growth.
Genesis Microchip (GNSS) 17.37 +0.78 : CE Unterberg Towbin upgraded ST Mkt Perform to ST BUY. Target $21. Cited faster growth rates, pure play nature, higher earnings leverage, leading integration/price performance, and co's China presence.
NVIDIA (NVDA) 21.10 +0.03 : Filed $500 mln shelf registration. Under the filing, co may offer shares of its common stock and preferred stock, various series of debt securities and/or warrants to purchase any of such securities with a total value of up to $500,000,000.
Ultratech Stepper (UTEK) 28.62 +1.17 : Ultratech Stepper (UTEK 28.62 +1.17). Merrill Lynch upgraded Ultratech Stepper to Buy from Neutral; firm said UTEK is the leading supplier of lithography equipment to the fast emerging mkt for "bumping" for semi flip-chip packaging, and the co has pioneered a new technology that has potential to solve several advanced IC technology problems; also, although UTEK announced that an order pushout from Q4 will cause an earnings shortfall, firm says orders have accelerated, increasing 2004 visibility. Target is $38.
Varian Semi (VSEA 42.90 +1.10). UBS upgraded Varian Semi to Buy from Neutral based on valuation, saying the stock is attractive at 31x their CY05 EPS est. Target is $50.
Taiwan Semi (TSM) 9.99 +0.09 : Barron's article highlighted TSMC, which has weathered the collapse associated with the Internet and telecom bubbles. The co now appears to be benefiting as the global economy heals and tech spending is snapping back. However, the stock is trading at a lofty 26x earnings and 4.2x book. The co's chairman Morris Chang is upbeat about its prospects given capacity utilization is likely to stay high, so long as prices are competitive. In addition, he's pleased with the co's 12-inch fabs and its ordering equipment. Chang also states "If you achieve 20% ROE for three years, for two to three years, it's attractive. It's been growing rapidly. And five to six times book is not inconceivable", which suggests Taiwan Semiconductor could move up by at least 18% from its current level and perhaps by as much as 42%. The article notes as the stock approaches those levels, the wise investor might do well to keep his eye on the exit. Analysts, on average, expect TSMC to earn NT$2.32 a share this year, and NT$3.49 a share in '04, exceeding the peak earnings of NT$3.43 set in 2000.
finance.yahoo.com
Don, thanks for keeping us up to date on those tables!
RtS |
