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<Picture>Tech Stock Analysis
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Updated for: February 10, 1998
Please note: Briefing.com is provided as an information service only. Charter Media, Inc. and Briefing.com do not make specific trading recommendations or provide individualized investment advice. Readers should make investment decisions based on thorough research and their own investment criteria. See Disclaimer.
General Commentary
America Online wowed the street, gaining 12 points in very heavy trading... The impetus for the advance - company announced that it will raise access fees for unlimited usage by $2.00 to $21.95... Management convinced that price hike won't result in mass defections... AOL also announced that it was slashing jobs at recently acquired CompuServe unit by 50%... Job cuts and price hikes - two ways to the street's heart... Cowen & Co. quickly raised price target from 105 to 150... Look for company to remain in the news as it is scheduled to report earnings after today's close... According to Zack's consensus estimate equals $0.16... Given stock's strong gains in recent days, anything less than $0.18 likely to be used as excuse to take profits... Not that anyone cares, but stock trades at 122x estimated earnings, 6.7x sales and 86x cash flow.
Aside from AOL, rest of tech sector was relatively quiet... Dell, Microsoft, Cisco and Lucent succumbed to light profit-taking... That said, techs remain the sector of choice for most investors looking to get back into the market... Of the 10 most actively traded stocks, 9 were tech stocks... Investors viewing techs as undervalued (AOL excepted) relative to groups such as drugs... Sector's growth prospects also attractive given market's slowing rate of growth... Monday's consolidation was the pause that refreshes.
Applied Materials joins AOL in reporting earnings after today's close... For more on earnings, see Briefing's Earnings Calendar.
Computer Systems & Peripherals
Brief: Contract Electronics Manufacturers (CEMs) remained very strong, with Jabil Circuits up over 2 points and SCI Systems adding 15/16... Impressive growth prospects and discounted valuations propelling group higher... PC makers were quit, with Sun Microsystems (-1 5/8) only stock posting a move of more than one point.
Computer Networking
Brief: Networkers spent the session digesting recent gains... Cisco shed 1 15/16 in profit-taking... Ascend slipped 9/16 despite expectations that company will announce a deal near $30 mln to provide AT&T with high speed switches for its telecom network... Argent reiterated its buy rating on Shiva (+3/8).
Computer Software & Services
Brief: Oracle's incredible rally continued, as stock got a lift from news that Morgan Stanley upped its FY98 and FY99 earnings estimates to $0.89 and $1.10 from $0.83 and $1.04... Set a 12-mo price target at 34 and raised its rating to outperform from neutral... UST Securities raised its rating on Microsoft to buy from hold... Computer Associates knocking on door of key resistance at 58, with penetration targeting near-term move to the mid- to upper-60s... Novell added 3/8 on surge in volume... Call activity also heavy... Is stock back in play?... First resistance is at 8 1/2, with a secondary ceiling at 10 1/2.
Semiconductor:
Brief: Chip stocks gave back some of their recent gains, as Dataquest, an independent research firm, lowered its projection of worldwide chip sales for 1998 from $175 bln to $160 bln... Intel (-1 47/64) and Altera (-1 5/8) were the biggest losers... Report showed that Intel insiders recently filed to sell more than 800,000 shares... Texas Instruments and Hitachi to end DRAM joint venture due to steep drop in DRAM prices... Both firms to take charges related to termination... Consolidation over past couple days has helped industry work off some the recent speculative excess... Look for group to resume recovery rally soon.
Semiconductor Equipment
Brief: SpeedFam sent another tremor through the volatile chip equipment industry when it warned that revenue and earnings in the current quarter will fall shy of estimates... Expects earnings of $0.32-$0.30 vs consensus estimate of $0.39... Stock held up remarkably well (-3/4) in face of the news, in part, because potential weakness was largely priced into stock... Nevertheless, investors used SFAM news as reason to take profits - particularly given that industry leader Applied Materials (-1 1/4) is set to deliver earnings after today's close... Other losers included KLA-Tencor, Novellus and ETEC Systems.
Telecommunications Equipment
Brief: Not a lot of news, thank goodness... Don't need more news like Friday when Qualcomm and Sawtek delivered earnings warnings... Lucent shed over one point in light profit-taking, while ADC Telecom extended its recovery rally... Stock up 31% since gapping sharply lower (again) in late January... Rebound losses some of its luster when placed in perspective - even after recent gains stock is down nearly 50% from its 12/31/97 high of 43 5/8.
[ Index ]
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