Advanced Micro Devices (AMD) 28.80 +0.65: AMD has started to get some respect over the past two quarters. The company has a long history of playing second banana to Intel (INTC) and competing against one of the world's best run companies has made market share tough to come by. Yet there are recent signs this may be changing and this raises the central investment question for AMD. Specifically, on a longer term time frame can AMD consistently compete against Intel? The two companies have gone at it for decades, and at times AMD developed promising technology only to see it ultimately hammered in the end-market by INTC. Markets have long memories which is why AMD trades at a 50% discount to the world's largest semiconductor company. But CSFB is out with an interesting call this morning. The firm is initiating AMD with a Buy rating and uses the following rationale: "Never before has AMD been able to truly go toe-to-toe against Intel in both technology and pricing and come out not only unscathed, but in a stronger position than before. We believe this has occurred over the past six months and it will continue going forward." Admittedly, end-market market dynamics are more favorable for AMD than they have been in the past. The PC market is more mature now which leaves INTC with less leverage than it's had in the past. Moreover, AMD Chairman and CEO W.J. Sanders III recently called the second quarter (the quarter AMD is currently in) a "trough quarter" for the semiconductor industry. With an expected ramp in the industry, and the company continuing to take market share, AMD looks attractive for investors with a long-term outlook near current levels. --Michael Ashbaugh, Briefing.com
09:58 ET ******
Take-Two Interactive Software (TTWO) 17.24 +1.06: This creator of interactive entertainment software games for the PC, PlayStation, Nintendo 64, Nintendo Game Boy, Sega Dreamcast, PlayStation®2 and the Xbox is benefitting from an initiation of coverage from USB Piper Jaffray with a BUY rating and $22 price target. While Take-Two may not be that well known, its games are very popular. The games are not only popular with children, but adults as well as interactive software games have become a mainstream entertainment choice. Consumer demographics for interactive software have expanded to include young adults, as well as women. The average age of a gamer is now 28....The company has been successful at increasing its reach. Reportedly, its Global Star subsidiary has captured 52% of the rapidly growing Palm Pilot market in North America. Also, the company is increasing market penetration of budget software titles and are taking advantage of the emergence of non-traditional retail channels such as drug stores and supermarkets to boost sales...The introduction of next-generation platforms will also provide a boost for TTWO's games. In addition to an aggressive push from Sony for its PlayStation 2, Microsoft has announced that it will launch the Xbox in the fall of 2001, and Nintendo has announced that it also plans to release GameBoy Advance and the GameCube in late 2001. The future-generation gaming platforms will have more powerful and realistic graphics and broadband connectivity will be an integral part of digital home entertainment....First Call consensus has TTWO earning $1.01 this year (ending Oct) and $1.24 next year for p/e's of 17.1x and 13.9x, respectively. TTWO is discounted relative to its peers as it's viewed as a turnaround story, but Briefing.com believes the stock will do very well over the next 9-12 months. -- Robert J. Reid, Briefing.com
09:20 ET ******
Morning Movers : Two weeks of consolidation for most of the market with no fresh catalyst to drive the market higher. That is until the upgrade this morning from Morgan Stanley in the chip equipment sector. One of the point gain leaders is Applied Materials (AMAT 51.04) which is currently projected to open more than 3 points higher. This suggests AMAT will run to resistance in the 54.24/54.86 area. If able to sustain the momentum following the opening advance AMAT must still work through a number of solid resistance barriers before it is positioned for a run at the recent high. An important secondary ceiling is at 56.56/56.85. Penetration of this bolsters the view that the two weeks of sideways trading was merely a temporary consolidation. Resistances of interest for other issues in the Morgan Stanley upgrade: KLAC 53.75/54, 56.67; LRCX 30, 30.90, 31.65 and ASML 27.05/27.44. Microsoft (MSFT 70.40) is indicated to open less than a point higher (+0.84) but is of interest as it pushes back toward a major chart barrier between 72.15/72.37. This marks the May high and the recovery high from last Nov. If able to breach, the next resistance is at 73.50/74. Some other momentum stocks and first levels of interest: CIEN 64/64.75; BEAS 36/36.35, 37; SEBL 46, 48. Based on the pre-market indicators, which have improved as the opening draws near, the Nasdaq Composite is positioned to surge back through the 2200 area with the recent recovery high the next resistance at 2232. The 2251/2255 (Jan low/retracement) barrier would come into play shortly thereafter. -- Jim Schroeder, Briefing.com
19:57 ET ****** 09-May-01
Activision (ATVI) 30.70 +1.71: It is a rare occurrence these days when a technology company confidently provides guidance beyond the current quarter. However, after posting better than expected Q4 results, Activision was more than happy to provide guidance not only for its current fiscal year, but for the next fiscal year as well. Some of the highlights-- past, present, and future-- are detailed below.
The Hindsight
For FY01 (ended March 31), net revenues of $620 mln and earnings of $0.75 per diluted share were the highest in the company's history
Q4 earnings of $0.03 per diluted share were $0.02 ahead of the consensus estimate; sales were up 22% to a record $127 mln
For the 2001 fiscal year, Activision was the fastest growing U.S. publisher
In Q4, Activision's U.S. console and handset business increased 27% vs last year despite a 3% decline in the overall market
Repaid remaining $8.5 mln balance of its 3-yr $25 mln term loan and eliminated roughly $46 mln of debt since 12-31-00
DSOs at record 54 days in March qtr. versus 94 days last year
The Visibility
FY02 EPS guidance raised to $0.80 from $0.76 (consensus is $0.77); revenues projected to be $605 mln
With Nintendo accelerating the launch of Game Boy Advance, ATVI now expects a loss of $0.05 per share in Q1 vs prior expectation for loss of $0.18 per share
Believes market will be slow for 5-6 months, but expects holiday season to mark the beginning of a strong growth phase for software sales that should span the next three years
Has 20 games in development for PS2; 10 for Game Boy Advance; and 13 for Xbox
Plans to release 46 new products in FY02 (20 SKUs for next generation consoles; 16 for current platforms; 10 for PC)
Forecasts FY03 EPS of $1.09 and revenues of $750 mln
Although the next 5-6 months may be a slow period for the industry, Activision, through its debt reduction efforts and product development, has done an excellent job of positioning itself to capitalize on what promises to be one of the most exciting periods of growth in the history of the entertainment software industry. Accordingly, Briefing.com would view interim dips in the stock as a buying opportunity in anticipation of an extended sales and earnings ramp beginning with the holiday season.-- Patrick J. O'Hare, Briefing.com
18:15 ET ****** 09-May-01
Wednesday After Hours Price changes vs the 4 pm ET levels: No major names reporting earnings but those beating estimates far outnumbered the disappointments. One of the strong performers was Activision (ATVI +1.51) which surpassed its Q4 estimate by $0.02 and more importantly raised guidance for FY02 by $0.04 to $0.80 vs consensus of $0.74. Competitor 3DO (THDO -0.08) beat its estimate by $0.01 but reported a drop in revenue of 59.9% y-o-y. The number one video game publisher Electronic Arts is up $0.43 in after hours trading. Global Crossing (GX +0.40) has been on the move after trouncing its estimate by $0.18; stated that cap spending for 2001 expected to remain unchanged. Also in the wireless industry, Wireless Facilities (WFII -0.93), was less fortunate as they missed by $0.06; reported that revenue fell 34.2%; guided full year revenue to $215-$240 vs consensus of $232. Rambus (RMBS -0.31) has been a volume leader as it continues to be pressured by the late day session announcement that it has lost its patent case with Infineon. For additional information on these, and other after hours developments, check out Briefing.com's Earnings Calendar and Short Stories pages... Currently, the S&P futures are at 1257, 2 points below fair value while the Nasdaq 100 futures are at 1883, 2 points below fair value. |
