RECAP & STOCKS TO WATCH FOR FRIDAY, 3-9-01
A number of downgrades in the optical fiber and storage sectors, along with a warning by tech bellwether Yahoo! (YHOO) ended the Nasdaq’s 3- day winning streak. All sectors slid lower, led by the hardware, software, Internet, and storage shares. Blue chips continued their winning streak on buying in the retail and cyclical issues, and propelled the Dow to a 5th day in positive territory.
The Nasdaq Composite slid 55 points to close at 2,168. Volume came in at 1.75 billion shares, with decliners beating advancers by 11 to 7. Blue chips diverged from the techs as the Dow gained another 128 points to finish at 10,858. Volume on the Big Board was 1.1 billion shares with advancers beating decliners by 17 to 14.
Though Intel’s warning will be the big news on Friday, it wasn't the only chip company to warn. RF Micro Devices (RFMD), TranSwitch (TXCC), On Semiconductor (ONNN), Intersil (ISIL) and Integrated Circuits (ICST) also issued profit warnings after Thursday's close, bringing the total number of chip companies to warn this week to 17. Only 30 chip companies issued warnings all of last quarter. The good news is that despite the warnings, the Semiconductor Index (SOX) is up 9.8% so far this week. Although the index will be pressured on Friday, the ability of the SOX to hold the 600 level would reinforce the sentiment that bad news is already being priced in.
From a technical standpoint, the Nasdaq Composite has support at 2,100 and has filled the gap made on Tuesday between 2,163 and 2,200. The Nasdaq needs to break resistance at 2,300 for any type of follow-through rally, otherwise a lower high will have been put in. The Dow has support at 10,700 and looks poised to test the 11,000 level again. The Semiconductor Index (SOX) is consolidating just under resistance at 650, with support at 600.
Intel (INTC): Company warned for Q1, seeing revenues below company's previous expectation of a 15% sequential decline. The company now expects revenue for the first quarter to be down approximately 25% from Q4 revenue of $8.7 bln. In the conference call, company said that due to the consequences of "pervasive" economic weakness, it now sees "weakness in nearly all Intel products." Intel would not give any guidance yet for Q2, noting that this would not be prudent following three straight warnings. Also noted that while US is the weakest geography, it is now seeing order cancellations in all regions, including Europe.
RF Micro Device (RFMD): Company warned for Q4, seeing revenues of $55 mln and loss per share of $0.03-0.04 (including charges of $0.02-0.03), vs. current consensus estimate of $0.02 profit and $72 mln in revenues
TranSwitch (TXCC): Company warned for Q1, seeing EPS of $0.16-0.17 vs. current EPS estimate of $0.19. Revenue will be essentially flat compared to last quarter's $51 mln.
McDATA (MCDT): Jack McDonnell, CEO and chairman said he feels “cautiously optimistic,” at this point, that the company would meet its 80 percent target revenue growth goal for the first quarter and for the fiscal year.
Loudcloud (LDCL): Provider of suite of Internet infrastructure services priced 25 mln IPO shares at $6. The company initially filed to sell 10 mln shares with a price range of $10-12 per share with several revisions to this range occurring as late as this afternoon. Loudcloud is the latest creation of Netscape founder Mark Andreesen. |
