From Briefing.com: Updated: 24-Jan-03 - General Commentary - After falling roughly 7% over the past five straight sessions, the Nasdaq was due for a bounce. Add some decent earnings news from the likes of Qualcomm (QCOM), Texas Instruments (TXN), Silicon Labs (SLAB), etc, to the oversold technical tone, and the ingredients were in place for a recovery try. Briefing.com suggested as much on this page yesterday, so we weren't at all surprised by Thursday's 2.1% rebound.
We also weren't terribly impressed. Index failed to generate much excitement after popping off the open. In fact, Nasdaq could only add 11 points to its opening level throughout the remainder of the day - this despite the relatively bullish earnings news and the oversold technical tone.
Muted recovery attempt suggests a few things. First, investors remain hesitant to buy aggressively as long as threat of war hangs over market. Two, anxiety over disappointing guidance is beginning to wear off but investors still not excited by what they're hearing regarding demand - at least not enough to pound the bid. Finally, failure to make a more aggressive run at key resistance in the 1400-1410 range suggests that bounce was nothing more than corrective in nature.
In order for traders to come back to sector more aggressively will need to see decisive break of this ceiling. Traders will also be watching to see if bellwether Philadelphia Semiconductor (SOX) index can rally back above the 322 level. SOX often leads rest of sector, so if it's recovery try fails would be bearish signal for rest of tech.
The few bright spots in tech sector at the moment, at least technically, are the telecom, networking and wireless groups. All three industry groups held up reasonably well during the recent pullback and each is trading above its long-term moving averages.
Please remember to monitor Briefing.com's In Play and Earnings Calendar pages for all the post- and pre- earnings coverage.
Robert Walberg, Briefing.com
6:42PM Thursday After Hours price changes vs 4pm ET levels: After finishing on a bullish note in the regular session, the positive tone has dissipated in the after hours session as the S&P futures, at 884, are 3 points below fair value while the Nasdaq 100 futures, at 1028, are 6 points below fair value. A handful of disappointing earnings reports, as well as some lackluster guidance from tech companies in particular, have contributed to the negative turn in sentiment.
Specifically, the news and corporate outlook embedded in Broadcom's (BRCM 16.13 -1.36) wasn't too disruptive, but the announcement that the company's CEO is resigning due to serious family matters has been as its stock is off nearly 8% in the after hours session. As for BRCM's operational performance, it reported a Q4 loss of $0.02 per share on revenues of $295.9 mln, as compared to Multex consensus estimates which called for a loss of $0.03 per share and revenues of $290 mln. On its conference call, BRCM guided Q1 sales up 3-5% on a sequential basis, which translates to $304-311 mln, and EPS to a 'small pro-forma profit.' The Multex consensus Q1 estimates stand at $296.1 mln and $0.02, respectively.
For its part, chip equipment maker KLA-Tencor (KLAC 36.12 -0.29) exceeded the Multex consensus EPS estimate of $0.14 by a penny on revenues of $330.6 mln (Multex of $330.6 mln) in its Q2 (Dec) report. For Q3, KLAC issued mixed guidance with EPS expected to be $0.12 (Multex of $0.11) and revenues at $300 mln (Multex of $309 mln); net orders are anticipated to be flat with Q2 levels. Finally, KLAC said it believes overall semiconductor capital equipment spending will increase about 10% in 2003. Related stocks to watch include the likes of AMAT, NVLS, KLIC and LRCX.
5:54PM PMC-Sierra offers in line Q1 revenue guidance (PMCS) 6.12 +0.31: -- Update -- On call, says it is likely that Q1 (Mar) revenues will be essentially flat versus Q4 levels (i.e. $52.6 mln) but says there is a small chance for a modest increase... current Multex consensus is $52.5 mln... separately, added that there is no significant end market improvement in sight... PMCS -0.16 at 5.95
5:40PM PMC-Sierra comments on restructuring (PMCS) 6.12 +0.31: -- Update -- On call, says it estimates charges for its operational restructuring to be $4-8 mln in both Q1 and Q2 of 2003... PMCS -0.14 at 5.97
5:25PM KLA-Tencor provides mixed Q3 guidance (KLAC) 36.41 +0.21: -- Update -- On call, says it expects net orders in Q3 (Mar) to be the same as the Dec. qtr... expects revenues to be about $300 mln (Multex consensus $309.9 mln) and EPS of $0.12 (Multex consensus $0.11)... KLAC -0.10 at 36.31
5:09PM KLA-Tencor comments on overall '03 equipment spending (KLAC) 36.41 +0.21: -- Update -- On call, says that, overall, it believes semiconductor capital equipment spending will increase about 10% in 2003
4:21PM KLA-Tencor beats by a penny (KLAC) 36.41 +0.21: Reports Q2 (Dec) earnings of $0.15 per share, $0.01 better than the Multex consensus of $0.14; revenues came in at $335.0 mln vs the Multex consensus estimate for revs of $330.6 mln.
5:15PM Broadcom guides Q1 revenue above consensus (BRCM) 17.49 +0.65: On call, says revenue in Q1 will be up 3% to 5% over Q4. That translates to $304 million to $311 million, compared to current average forecast of $296 million; says it will achieve "small pro-forma profit" in first quarter compared to average estimate of $0.02 profit.
4:51PM Broadcom's CEO resigns due to 'serious family matters' (BRCM) 17.49 +0.65: -- Update --
4:19PM Broadcom tops estimates (BRCM) 17.49 +0.65: Reports Q4 (Dec) loss of $0.02 per share, $0.01 better than the Multex consensus of ($0.03); revenues rose 2.0% year/year to $295.9 mln vs the $290.0 mln consensus.
5:12PM Varian Semi tops estimates; guides higher (VSEA) 28.62 +1.24: Reports Q1 (Dec) earnings of $0.08 per share, in line with the Multex consensus of $0.08; revenues rose 7.7% year/year to $84.0 mln vs the $83.8 mln consensus; Q2 earnings per share are "anticipated to range between $0.10 to $0.20 per share" -- Multex consensus estimate is for a net loss of $0.01 per share.
4:49PM Applied Micro matches consensus; CFO to retire (AMCC) 3.90 +0.07: Reports Q3 (Dec) loss of $0.05 per share, in line with the Multex consensus. Revs fell 47.5% year/year to $21.1 mln vs the $21.6 mln consensus. Co announces the retirement of CFO William Bendush.
4:45PM Western Digital exceeds Wall Street views (WDC) 7.40 +0.26: Reports Q2 (Dec) earnings of $0.36 per share, $0.22 better than the Multex consensus. Revs rose 28.6% year/year to $749.5 mln vs the $631.1 mln consensus. "The hard drive industry faced very favorable conditions in the second quarter," comments co CEO. "These results demonstrate the significant earnings leverage and financial efficiency of our business and operating model."
4:41PM Integrated Device guides Q4 revs. below consensus (IDTI) 7.84 +0.45: -- Update -- On call, says near-term outlook remains very cautious and expects revenues to be flat on a sequential basis at approx. $79 mln (current Multex consenus is $81.5 mln)... adds that it has lowered its internal, bottoms-up revenue forecast for FY04 to growth of a few percentage points per quarter from current trough levels
4:22PM Integrated Device misses by $0.01 (IDTI) 7.84 +0.45: Reports Q3 (Dec) loss of $0.20 per share, $0.01 worse than the Multex consensus of ($0.19); revenues fell 1.4% year/year to $79.0 mln vs the $79.8 mln consensus.
4:38PM Microchip beats by a penny, issues Q4 guidance (MCHP) 22.60 +0.79: Reports Q3 (Dec) earnings of $0.18 per share, $0.01 better than the Multex consensus of $0.17; revenues rose 20.5% year/year to $171.0 mln vs the $174.9 mln consensus. Expects Q4 EPS of $0.18 and expects flat to up-low single digits sequential rev growth (roughly in-line with consensus).
4:36PM Intl Rectifier beats by $0.03 (IRF) 20.50 +0.90: Reports Q2 (Dec) earnings of $0.16 per share, $0.03 better than the Multex consensus of $0.13; revenues rose 21.8% year/year to $209.5 mln vs the $211.6 mln consensus.
4:35PM Conexant matches consensus (CNXT) 1.74 +0.08: Reports Q1 (Dec) loss of $0.12 per share, in line with the Multex consensus of ($0.12); revenues rose 4.2% year/year to $164.5 mln vs the $161.0 mln consensus.
4:22PM Lattice Semi reports in line (LSCC) 8.95 +0.08: Reports Q4 (Dec) earnings of $0.06 per share, in line with the Multex consensus of $0.06; revenues rose 10.7% year/year to $57.7 mln vs the $57.2 mln consensus.
4:21PM Genesis Microchip beats by $0.02 (GNSS) 16.60 +0.54: Reports Q3 (Dec) earnings of $0.09 per share, $0.02 better than the Multex consensus. Revs rose 3.5% year/year to $51.6 mln vs the $50.6 mln consensus. For Q4, co sees revs flat with Q3 level of $51.6 mln (consensus $50.7 mln).
4:17PM Atmel reports in line (ATML) 2.14 +0.09: Reports Q4 (Dec) loss of $0.06 per share, in line with the Multex consensus of ($0.06); revenues rose 7.0% year/year to $304.6 mln vs the $306.1 mln consensus. Although the $0.06 number excludes multiple ex items, it appears comparable to consensus.
4:15PM Microsemi guides Q2 in-line (MSCC) 7.72 -0.08: Company sees Q2 (Mar) EPS of $0.01-0.03 (Multex consensus $0.01).
4:06PM Microsemi reports in line (MSCC) 7.74 -0.06: Reports Q1 (Dec) earnings of $0.01 per share, in line with the Multex consensus of $0.01; revenues rose 24.2% year/year to $57.0 mln vs the $45.5 mln consensus.
4:15PM Flextronics beats by 2 cents, maintains guidance (FLEX) 8.21 +0.70: Reports Q3 (Dec) earnings of $0.13 per share, $0.02 better than the Multex consensus of $0.11; revenues were unchanged from the year-ago period at $3.85 bln. Maintains Q4 guidance of EPS of $0.05-$0.08 on $3.0-$3.3 bln in sales.
4:14PM Power Integrations beats by $0.04 (POWI) 18.37 +0.45: Reports Q4 (Dec) earnings of $0.12 per share, $0.04 better than the Multex consensus of $0.08; revenues rose 23.7% year/year to $29.2 mln vs the $28.6 mln consensus.
4:07PM JDS Uniphase reports Q2 results (JDSU) 2.83 +0.11: Reports Q2 (Dec) loss of $0.13 per share, $0.08 worse than the Multex consensus of ($0.05); revenues fell 45.3% year/year to $156.6 mln vs the $152.9 mln consensus. (Pro forma loss does not exclude restructuring and other costs, may not be comparable with Multex consensus.)
Close Dow +50.74 at 8369.47, S&P +8.98 at 887.34, Nasdaq +28.79 at 1388.27: The end result of today's trading activity is apt to be pleasing to bulls, but the market certainly had to work for its gains... At first blush, the gains appeared as if they would be easier to come by as the futures market, cheered by a round of generally reassuring earnings news from the tech sector and a lack of disruptive headlines on Iraq, traded with a bullish bias this morning and presaged a positive start for the cash market... That forecast proved to be on the mark as the indices started the session on an upbeat note...
The good vibes quickly dissipated, though, when AT&T (T 20.49 -4.83) opened for trading and headed due south with investors registering their sharp disappointment over the company's Q4 report, its warning for Q1, its expectation that total telecommunications industry spending will decline again this year, and its declaration that it will no longer provide quarterly or annual EPS guidance... A less than inspiring earnings report from BellSouth (BLS 23.55 -1.73) didn't help matters either for the telecom services group, which weighed on the broader market throughout the session...
By mid-day, however, the sting of AT&T's losses had worn off and the market managed to regroup, helped by a resurgent tech sector and select gains in key blue chip industry groups like transportation, financial, oil service, and basic materials... Gains in IBM (IBM 81.05 +1.35), Microsoft (MSFT 52.28 +1.28), 3M (MMM 128.97 +1.47), Citigroup (C 37.14 +1.24) and United Technologies (UTX 65.40 +1.60) more than offset the drop in AT&T; in fact, 22 of the Dow's 30 components finished higher on the day...
Apparently, the Dow's morning re-test of the bottom end of the trading range it has been locked in since late-October was enough to inspire renewed buying interest that moved the blue chip average back above the 8300 mark and back into positive territory for the year... Although Iraq wasn't the main focal point for market participants today, it was evident in the jump in gold prices (+$4.80 at $364.70/oz.) and the weakness in the dollar that Iraq remains squarely on the radar screen of concern... In other developments, jobless claims for the week of Jan. 18 rose 18K to 381K... That was in line with the consensus estimate of 383K and supported the view that the pace of layoffs is slowing as hiring remains weak...
Meanwhile, the Leading Indicators report showed a reading of 0.1%-- its third consecutive monthly increase-- but had little impact on the proceedings as the market was already aware of most of the components in the report... Tomorrow, earnings news will again be the focus for traders... For a full rundown of companies scheduled to report their results, be sure to visit Briefing.com's Earnings Calendar... Nasdaq 100 +2.6%, NYSE Adv/Dec 2049/1236, Nasdaq Adv/Dec 1894/1344
11:40AM KLA-Tencor tests weekly low (KLAC) 35.89 -0.31: -- Technical -- Slide off the early high extended but KLAC has thus far held at support at this week's low (35.67) which also 50% retrace of Oct/Dec rally. Short term takes a sustained push back through resistances at 36.10/36.20 and the 36.50 area to help improve the weaker bias. Next supports, if a breakdown is seen, come into play at 35.14 (Dec low) followed by the Mid-Nov low at 34.39.
1:33PM Qualcomm (QCOM) 37.93 +1.24: AG Edwards upgrades Hold to BUY. Target $48. In light of favorable environment for CDMA products and royalties.
1:17PM Texas Instruments (TXN) 16.17 +1.92: JMP Securities upgrades Mkt Perform to MKT OUTPERFORM. Target $18. Given more attractive valuation and higher likelihood of continuing success rate with Nokia and penetrating Asian ODMs and second-tier cellphone companies with integrated 2G and 2.5G chipsets.
1:05PM Kulicke & Soffa (KLIC) 6.34 +0.01: Adams Harkness upgrades Reduce to MKT PERFORM. Target $6 to $7. New rating supported by revisions in model and long-term growth outlook.
12:33PM Texas Instruments (TXN) 15.98 +1.73: AG Edwards upgrades Hold to BUY. Target $20. Cites TXN's top market share position in the DSP market, complementary analog business, broad customer base, and strong financial position.
12:05PM Cirrus Logic (CRUS) 2.31 -0.33: Pacific Growth Equities downgrades Equal Weight to UNDER WEIGHT . Cites disapointing Dec qtr in line with pre-announcement; lowering forecast with unforseen return to profitability.
12:01PM Skyworks (SWKS) 7.55 -0.62: WR Hambrecht downgrades Buy to HOLD. Firm would like to see acceleration in revenue growth; thinks there is risk in '03 to SWKS' ability to maintain its penetration rate at Samsung, and maintains cautious stance for near-term.
11:54AM Vishay (VSH) 10.34 -0.65: CSFB downgrades Outperform to NEUTRAL. Target $10. Believes continued deterioration in ASPs for actives business into Q103 and sluggish end markets demand may continue to place downward pressure on gross margins over next several quarters.
11:42AM Texas Instruments (TXN) 15.94 +1.69: Banc of America Sec upgrades Neutral to BUY. Target $20. -- Technical -- Confidently recommends purchase based on solid outlook, abatement of wireless inventory concerns, relative price weakness, and impressive cash flow generation.
11:27AM Texas Instruments (TXN) 15.92 +1.67: Wachovia upgrades Mkt Perform to OUTPERFORM. Believes guidance for slight sequential decline in wireless revenues is much better than larger decline many investors feared.
10:23AM Texas Instruments (TXN) 15.60 +1.35: Deutsche Securities upgrades Sell to HOLD. Target $15. Based on increasing evidence of focus on returns and free cash flow, valuation below firm's $15 price target, and relatively upbeat guidance for Q103.
10:10AM LSI Logic (LSI) 5.00 -0.90: Morgan Stanley downgrades Equal-weight to UNDERWEIGHT . Reflects a slower earnings trajectory and a muted business outlook for the company.
9:02AM Cirrus Logic cut to Underweight at Pacific Growth following warning (CRUS) 2.64:
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