From this morning 09:24 ET Morning Movers : Early indications suggest a modestly weaker opening with the tech dominated Nasdaq Composite slightly more negative than the broader market. The news that Broadcom (BRCM 35.57) has issued a revenue warning has apparently not taken the market by surprise as the reaction to this and the negative comments from CSFB that it expects to lower estimates significantly has only been modestly bearish. Currently BRCM is indicated to open less than 1 point lower. Technically recent action is disappointing. Although it bounced off a retracement support near 32 last week and broke above its 50 day simple ma earlier this week accompanied with improving technical readings, it failed to close the May 29 gap or take out its 20 day moving average before it fell back below the 50 day yesterday. Follow through selling this morning beyond the 33 area opens the door to fresh lows for the move with the next of significance thereafter in the 30/29 area. A similar set up is evident in competitor PMC Sierra (PMCS 34.03) (back below 50 day ma) with its recent trading range extremes providing supports at 33 and 30. Stabilization above the 50 day ma for both is needed to bolster the turnaround scenario. One stock that may prove of interest is Check Point Software (CHKP 49.19). The momentum favorite has been punished for the last two weeks but was upgraded by First Union and is indicated to open 1 point higher. The pattern of the rebound off the recent low and the oversold posture suggest potential for follow through to develop. A move to a new recovery high exposes initial resistance near 51.25 with a minor retracement and chart barrier following at 52/52.3. A case can be made for weakness to develop in the Nasdaq Composite given the break yesterday of its four day winning streak, the failure at the Jan/May trendline and the short term overbought posture. A breach of yesterday's low (2204) opens the door to a retracement in the 2193 area. It will take losses back through 2175 to damage the bullish pattern of the last week. -- Jim Schroeder, Briefing.com
19:44 ET ****** 06-Jun-01
Broadcom (BRCM) 35.57 -1.99: Broadcom comes in with a late warning Wednesday night, but it would be tough to accuse them of trying to execute a stealth warning, given that everyone has seen this announcement coming for weeks. On May 23, Morgan Stanley analyst Mark Edelstone said that his estimate of a 23% sequential revenue decline was too optimistic, and by May 30, he slashed that estimate to -32%. SG Cowen was next, when it noted on May 31 that Motorola (MOT) orders for BRCM equipment would be weak. And finally, on Monday, Goldman Sachs said that BRCM would fall short of its -23% sequential revenue estimate and Weisel Partners cut numbers on the company. Given that lead-in to today's announcement, no one should have been shocked by the company's warning that Q2 revenues will fall by 32-35% vs Q1. The announcement didn't contain much color on the shortfall -- that will have to wait until the conference call at 8:45 am ET on Thursday. But there was a tantalizing hint at better times to come. CEO Henry Nicholas said that Broadcom is starting to see some signs of stabilization in the business for the second half of the year. That's similar to many comments we have heard in tech-land that have been responsible for keeping hope alive over the past couple months. What they amount to is an indication that the inventory correction phase of this downturn is probably nearing its end. That's good news, so far as it goes. Unfortunately, tech stocks have already completely discounted this expected bottom of the cycle. The key question for future stock prices is end-user demand. With inventories getting back into line, new demand will trigger new sales. But will demand grow 50%? 30? 10? 0? Will it keep falling? That's all that matters now, and you can toss all those company comments about a bottom-in-sight aside when you try to answer this question, because the companies have very little clue about end-user demand in late 2001. Unfortunately, recent indications do not offer much reason for optimism. What began as a US downturn is now global, and the bottom has almost certainly not been hit outside of the US. Furthermore, we still believe that the excesses of the late 1990s will take longer than just two quarters to work out, and that demand will stagnate for several quarters to come. With a product line that is focussed more on consumers and enterprises than telecom carriers, Broadcom is better placed than communications IC companies such as PMCS, AMCC, and VTSS, but its challenges are not over yet. - Greg Jones, Briefing.com
18:54 ET ****** 06-Jun-01
Philip Morris (MO) 48.05 -1.95: The tobacco giant is down noticeably in after hours action after a Los Angeles jury ordered the company to pay more than $3 billion in punitive damages, and $5.5 million in compensatory damages, to a 56-year-old cancer patient who accused MO of fraud, conspiracy and negligence. While MO has already indicated that it will appeal the ruling, it remains a landmark decision for a couple of reasons. First, it was one of the largest individual awards in a case against the industry, and secondly, it was the first smoking and health-related lawsuit to reach trial in Los Angeles. Needless to say, it is a troublesome precedent for MO, which has succeeded in fending off lawsuits in other states, but obviously, is finding that the sailing isn't going to be as smooth in the Golden State. This verdict, of course, opens the door for other individuals to test their mettle in challenging MO. It will also reignite concerns surrounding the negative impact of tobacco litigation, which had diminished in the wake of the rotation into the defensive-oriented tobacco group as the tech sector cratered, the tobacco companies' previous success in the courtroom, and the Republican victory in the Presidential Election. With MO being a component of the Dow and S&P 500, the broader market is going to feel the weight of this verdict, too, as it is reasonable to expect industry peers like R.J. Reynolds (RJR), UST, Inc. (UST), British American Tobacco (BTI), and Loews (LTR) will trade lower in sympathy as well. At the moment, MO's 50-day simple moving average at 49.39 has been violated, and if that negative bias persists through the close of regular action tomorrow, Briefing.com would expect the stock to remain vulnerable to further selling pressure over the near-term. Subsequent support levels are found at 48, 44, and 41.47.-- Patrick J. O'Hare, Briefing.com
18:07 ET ****** 06-Jun-01
Wednesday After Hours Prices vs the 4 pm ET levels: Another relatively quiet between season after hours session. One of the most active stocks in terms of points/volume is Carreker Corp (CANI +3.68). The stock missed by $0.03 for Q1 but has adjusted up FY01 number to reflect a recent acquisition with EPS increased by $0.08. Philip Morris (MO -1.75) got some bad news on the legal front as a jury in California awarded an individual $3 bln in punitive damages. Clearly this will be appealed but tobacco stocks (BTI, LTR, RJR and UST) may be hurt over the short term given the size of the award and the potential for an increase in the number of suits. Also coming out with earnings was Stratos Lightwave (STLW -0.27) which reported in line with expectations and indicated that Q1 and Q4 sales will be comparable with a 20% pickup expected in FY02. Retailers and restaurants are beginning to report their monthly comparable store sales figures and these groups could be in play amid a relatively quite market. The figures for retailers were: GES -15.4%, AEOS +0.2%, JWN -2.2% and HOTT +1.5%. Restaurants reporting included: APPB +2.3% and EAT +2.7%. Warnings were issued by OVTI, CFTI and GEMP. In other news there has been some talk that Chiron (CHIR -2) has a convertible note auction in the works. Currently the S&P futures are at 1271 unchanged vs fair value while the Nasdaq 100 futures are at 1903, 3 point below fair value. |
