Market Snapshot
briefing.com
| Dow | 33869.75 | +125.96 | (0.37%) | | Nasdaq | 11456.89 | +143.53 | (1.27%) | | SP 500 | 4046.80 | +30.58 | (0.76%) | | 10-yr Note | -4/32 | 3.49 |
|
| | NYSE | Adv 2061 | Dec 912 | Vol 780 mln | | Nasdaq | Adv 2685 | Dec 1835 | Vol 5.6 bln |
Industry Watch
| Strong: Consumer Discretionary, Energy, Information Technology, Communication Services, Real Estate |
| | Weak: Consumer Staples |
Moving the Market
-- Tesla's (TSLA) favorably earnings report driving a continued rebound effort in the mega cap space, which is bolstering the broader market
-- Heavy slate of earnings news receiving mixed reactions from investors
-- Better than expected data releases this morning, including the Advance Q4 GDP Report, weekly initial jobless claims, and December durable goods orders
-- Rising Treasury and strengthening dollar following the 8:30 a.m. ET release
|
Closing Summary
26-Jan-23 16:25 ET
Dow +205.57 at 33949.36, Nasdaq +199.06 at 11512.42, S&P +44.21 at 4060.43
[BRIEFING.COM] Today's trade shaped up to be decidedly positive after hitting an air pocket around mid-morning. The main indices moved higher right out of the gate following Tesla's (TSLA 160.27, +15.84, +11.0%) strong quarterly results and outlook, which drove a continued rebound in the mega cap space, and Chevron's (CVX 187.79, +8.71, +4.9%) massive $75 billion stock repurchase program announcement.
There was also a slate of pleasing data releases this morning that helped support the positive bias. Namely, the Advance Q4 GDP Report, weekly initial jobless claims, and December durable goods orders all came in better than expected.
Some eventual selling interest kicked in mid-morning, driven presumably by an awareness that this morning's strong data releases could prevent the Fed from pausing its rate hikes in the near future, along with a lingering sense that the market might be getting ahead of itself with the January rally.
The Dow Jones Industrial Average, weighed down by IBM's (IBM 134.45, -6.31, -4.5%) earnings-driven weakness, and the S&P 500 slipped into negative territory at their intraday lows.
Nonetheless, equities once again proved to be resilient to selling efforts and the main indices resumed their upside charge. The bounce accelerated in the afternoon trade, likely driven by some short-covering activity and a fear of missing out on further gains, the indices closed at or near their highs for the session.
Mega cap leadership was an important support factor in today's turnaround. The Vanguard Mega Cap Growth ETF (MGK) rose 1.7% versus a 0.8% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.1% gain in the S&P 500.
Ten of the 11 S&P 500 sectors logged a gain today led by energy (+3.3%), which was a reflection of Chevron's strong performance. The influential consumer discretionary (+2.0%), communication services (+1.7%), and information technology (+1.6%) sectors were also among the top performers.
The consumer staples sector (-0.3%) was the lone the laggard sporting a loss by the close.
- Nasdaq Composite: +10.0% YTD
- Russell 2000: +8.1% YTD
- S&P Midcap 400: +7.4% YTD
- S&P 500: +5.8% YTD
- Dow Jones Industrial Average: +2.4% YTD
Reviewing overnight developments:
- Q4 GDP-Adv. 2.9% (Briefing.com consensus 2.6%); Prior 3.2%; Q4 Chain Deflator-Adv. 3.5% (Briefing.com consensus 3.2%); Prior 4.4%
- The key takeaway from the report is that the economy was a long way from a recession in the fourth quarter, although consumer spending (and inflation) did moderate some.
- December Durable Orders 5.6% (Briefing.com consensus 2.9%); Prior was revised to -1.7% from -2.1%; December Durable Goods-ex transportation -0.1% (Briefing.com consensus -0.2%); Prior was revised to 0.1% from 0.2%
- The key takeaway from the report is that overall manufacturing activity was actually quite subdued in December, evidenced by the 0.2% decline in nondefense capital goods orders excluding aircraft, which is a proxy for business spending.
- Weekly Initial Claims 186K (Briefing.com consensus 205K); Prior was revised to 192K from 190K; Weekly Continuing Claims 1.675 mln; Prior was revised to 1.655 mln from 1.647 mln
- The key takeaway from the report is that the low level of initial claims is indicative of a tight labor market, which is something that should keep the Fed concerned about wage pressures remaining persistently high.
- December Adv. Intl. Trade in Goods -$90.3 bln; Prior was revised to -$82.9 bln from -$83.3 bln
- December Adv. Retail Inventories 0.5%; Prior was revised to 0.0% from 0.1%
- December Adv. Wholesale Inventories 0.1%; Prior was revised to 0.9% from 1.0%
- December New Home Sales 616K (Briefing.com consensus 614K); Prior was revised to 602K from 640K
- The key takeaway from the report is that it reflects how the pullback in mortgage rates has spurred some renewed demand among home buyers; however, affordability and supply pressures remain for many prospective buyers and that is holding back overall sales.
American Express (AXP), Chevron (CVX), and Colgate-Palmolive (CL) are among the notable names reporting earnings ahead of tomorrow's open.
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 a.m. ET: December Personal Income (Briefing.com consensus +0.2%; prior +0.4%) and Spending (Briefing.com consensus -0.1%; prior +0.1%), PCE Price Index (Briefing.com consensus 0.0%; prior +0.1%) and core-PCE Price Index (Briefing.com consensus +0.3%; prior +0.2%)
- 10:00 a.m. ET: December Pending Homes Sales (Briefing.com consensus -1.0%; prior -4.0%), January University of Michigan Consumer Sentiment - Final (Briefing.com consensus 64.6; prior 64.6)
Upside charge continues ahead of close
26-Jan-23 15:30 ET
Dow +156.53 at 33900.32, Nasdaq +167.89 at 11481.25, S&P +35.06 at 4051.28
[BRIEFING.COM] Equities extended their gains recently, leaving the main indices at or near their best levels of the day.
After the close, Intel (INTC), KLA Corp (KLAC), and Visa (V) will headline the earnings reports.
American Express (AXP), Chevron (CVX), and Colgate-Palmolive (CL) are among the notable names reporting earnings ahead of tomorrow's open.
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 a.m. ET: December Personal Income (Briefing.com consensus +0.2%; prior +0.4%) and Spending (Briefing.com consensus -0.1%; prior +0.1%), PCE Price Index (Briefing.com consensus 0.0%; prior +0.1%) and core-PCE Price Index (Briefing.com consensus +0.3%; prior +0.2%)
- 10:00 a.m. ET: December Pending Homes Sales (Briefing.com consensus -1.0%; prior -4.0%), January University of Michigan Consumer Sentiment - Final (Briefing.com consensus 64.6; prior 64.6)
energy complex settles mixed
26-Jan-23 15:00 ET
Dow +125.96 at 33869.75, Nasdaq +143.53 at 11456.89, S&P +30.58 at 4046.80
[BRIEFING.COM] The main indices continued on steady climb in the last half hour.
The upside moves brought most of the S&P 500 sectors into positive. Consumer staples (-0.3%) and health care (-0.1%) are the lone laggards in negative territory.
Energy complex futures settled in mixed fashion. WTI crude oil futures rose 1.1% to $81.05/bbl and natural gas futures fell 2.2% to $2.85/mmbtu.
On a related note, the S&P 500 energy sector (+2.7%) remains in first place by a wide margin.
Seagate outperforms after earnings, McCormick slips following results
26-Jan-23 14:30 ET
Dow +69.59 at 33813.38, Nasdaq +136.71 at 11450.07, S&P +25.27 at 4041.49
[BRIEFING.COM] In the last half hour the S&P 500 (+0.63%) has held near session highs, firmly in second place among its counterparts.
S&P 500 constituents Seagate Tech (STX 69.77, +7.52, +12.08%), United Rentals (URI 429.01, +36.53, +9.31%), and First Solar (FSLR 176.60, +8.34, +4.96%) pepper the top of the standings. STX gains following earnings/guidance, URI moves higher after shareholder return news and guidance overshadowed unimpressive earnings, while FSLR bucks the broader trend in solar to show solid gains.
Meanwhile, McCormick (MKC 73.96, -4.02, -5.16%) is one of today's top underperformers following this morning's Q4 miss & mixed guidance.
Gold snaps winning streak
26-Jan-23 14:00 ET
Dow +105.28 at 33849.07, Nasdaq +123.36 at 11436.72, S&P +24.49 at 4040.71
[BRIEFING.COM] With about two hours to go on the penultimate session of the week the tech-heavy Nasdaq Composite (+1.09%) holds a commanding lead atop the standings.
Gold futures settled $12.60 lower (-0.6%) to $1,930.00/oz, snapping a lengthy five-session winning streak after this morning's better than expected GDP reading.
Meanwhile, the U.S. Dollar Index is up about +0.2% to $101.86.
Better than feared is good enough
It was hard not to be impressed with yesterday's price action. The major indices made a remarkable turnaround after absorbing the initial hit from Microsoft's (MSFT) disappointing fiscal third quarter outlook. Notably, the S&P 500 would not stay below its 200-day moving average. Rather, an early breach of that key support level drew buyers back into the mix and they didn't let go once the S&P 500 reclaimed a posture above the 200-day moving average.
It was a technically-charged rally for the most part, although many stretched to make it a fundamental rally with claims that earnings and earnings guidance have been better than feared.
That's a long way from saying that earnings and earnings guidance have been good. In fact, neither is the case in aggregate, evidenced by earnings growth estimates for Q4 and FY23 that have come down since the start of the reporting period.
The latter point notwithstanding, the stock market isn't dealing in absolutes. It is dealing in relative terms because it is wedded to the idea that 2023 can't possibly be as bad as 2022 was for the stock market, so it likes seeing earnings that are "better than feared;" it likes seeing economic data that is "better than feared;" and it likes contemplating monetary policy that is "better than feared."
"Better than feared" seems to be synonymous with "good enough" to keep the rebound effort going. We'll see how things translate today, because several key items weren't just better than feared, they were better than expected.
To begin, Tesla (TSLA) reported better than expected Q4 results and provided better than expected commentary on demand patterns, noting it has seen the strongest orders year-to-date in its history. Shares of TSLA are up 8.5% in pre-market action.
The response to Tesla's report and outlook has put a bid in other mega-cap stocks that has been supportive to the broader market, overshadowing some tepid results and/or guidance from the likes of IBM (IBM), Dow, Inc. (DOW), and Sherwin-Williams (SHW).
Meanwhile, we would venture to say that Dow component Chevron (CVX) announced a better than expected capital return plan that includes a $75 billion (with a 'b') share buyback authorization and a 6% increase in its dividend. Shares of CVX are up 3.6%.
The key economic data this morning was also better than expected.
- The Advance Q4 GDP Report showed real GDP increasing at an annual rate of 2.9% (Briefing.com consensus 2.6%) following a 3.2% increase in the third quarter. The GDP Price Deflator was up 3.5% (Briefing.com consensus 3.2%) following a 4.4% increase in the third quarter. The Q4 PCE Price Index was up 3.2% versus 4.3% in the third quarter.
- The key takeaway from the report is that the economy was a long way from a recession in the fourth quarter, although consumer spending (and inflation) did moderate some.
- Initial jobless claims for the week ending January 21 decreased by 6,000 to 186,000 (Briefing.com consensus 205,000) while continuing jobless claims for the week ending January 14 increased by 20,000 to 1.675 million.
- The key takeaway from the report is that the low level of initial claims is indicative of a tight labor market, which is something that should keep the Fed concerned about wage pressures remaining persistently high.
- Durable goods orders in December increased 5.6% month-over-month (Briefing.com consensus 2.9%) following an upwardly revised 1.7% decline (from -2.1%) in November, bolstered by a 115.5% increase in nondefense aircraft and parts orders. Excluding transportation, durable goods orders were down 0.1% month-over-month (Briefing.com consensus -0.2%) following a downwardly revised 0.1% increase (from +0.2%0 in November.
- The key takeaway from the report is that overall manufacturing activity was actually quite subdued in December, evidenced by the 0.2% decline in nondefense capital goods orders excluding aircraft, which is a proxy for business spending.
Currently, the S&P 500 futures are up 24 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 127 points and are trading 1.1% above fair value, and the Dow Jones Industrial Average futures are up 86 points and are trading 0.2% above fair value. The 2-yr note yield is up three basis points to 4.17% and the 10-yr note yield is up two basis points to 3.48%.
It will be a higher open for stocks that is rooted in a rash of earnings and economic data that were "better than feared" and better than expected. That's a good combination. Now, all that remains to be seen is if today's price action also remains "better than feared" and better than expected.
-- Patrick J. O'Hare, Briefing.com
Dow posts EPS miss and announces workforce reduction under weight of slowing economic growth (DOW)
As a highly cyclical company that's viewed as a barometer for the health of the global economy, the quarterly results and outlook from chemical giant Dow (DOW) are closely scrutinized. This morning, the company didn't have very encouraging news to share as it missed 4Q22 EPS and revenue estimates, while guiding 1Q23 revenue well below expectations.
- Adding to the angst, DOW also announced a restructuring plan that includes the elimination of approximately 2,000 positions (2.6% of its workforce), the shutdown of select assets, and a reduction in operating expenses. In total, the company expects these actions will help it achieve $1.0 bln in cost savings in 2023.
- While investors have generally cheered the wave of job reductions that have swept across the technology sector, this action from DOW has a gloomier feel to it. Many tech companies, such as Google (GOOG), Meta Platforms (META), and Microsoft (MSFT), aggressively ramped up hiring as the pandemic faded, anticipating that the economy would continue to flourish. Now, those companies are simply returning to a more normalized workforce level as the reality of an economic pullback sets in and as enterprises rein in IT spending.
- DOW, on the other hand, is a company that touches many end markets around the world. Due to soaring energy costs in Europe, COVID-related headwinds in China, and weakening consumer spending, DOW was already taking actions to reduce costs before today's layoff announcement.
- For instance, the company reduced its natural gas consumption at its European sites by 15% in Q3, while also temporarily lowering its polyethylene capacity by 15% to align production rates with demand and supply chain constraints. Therefore, the initiatives disclosed today suggest that the company sees more storm clouds on the horizon for the global economy.
- Indeed, DOW's Q4 results indicate that business conditions are weakening. Overall volume decreased by 8% sequentially with declines seen in every region as customers reduced inventory levels in the face of slowing growth. The Europe, Middle East, Africa, and India (EMEAI) region was particularly weak as volume plunged by 18%. In the U.S., the construction and consumer durables end markets took a turn for the worse. Similar to Q3, mobility was a rare area of strength, driven by higher auto sales in China.
- The decrease in volume had a ripple effect across DOW's financials, causing operating EBIT margin to dive by 1,070 bps to 5.1%. One of the few positives is that cash flow from operations increased by $138 mln sequentially to $2.1 bln, thanks to its efforts to prioritize cash flow generation by focusing on higher-value products and implementing cost saving measures.
- The company's cash flow generation is significant because it supports its generous dividend yield of 4.8%, which is a major draw for the stock.
Overall, DOW's downbeat results and guidance, in addition to the job cuts, paint a rather bleak picture of the macroeconomic environment. A healthy dividend and a reasonable valuation with a forward P/E of 14x are key attributes supporting the stock. Easing energy and natural gas costs in Europe should also work in DOW's favor. However, it's hard to imagine that a highly cyclical name like DOW will really prosper as economic growth continues to be squeezed by rising interest rates, COVID-related headwinds in China, and persistently high inflation.
Sherwin-Williams doused in red as its FY23 outlook spooks investors (SHW)
After peer PPG Industries (PPG) signaled confidence in economic conditions improving as the year progressed last week, a colorful picture formed around Sherwin-Williams (SHW -9%), helping propel shares roughly 5% higher. Unfortunately for the paints and coatings manufacturer, this bullish mood around SHW leading into its Q4 earnings report today only added fire to its shares' pronounced sell-off.
- The headline grabbing most of the attention today was SHW's FY23 outlook. The company guided to adjusted earnings and sales growth well below consensus, expecting $7.95-8.65 and a mid-single-digit percent decline to flat growth yr/yr, respectively.
- SHW did not sugarcoat the situation in which it is finding itself. It is staring down a very challenging demand environment in 2023, with limited visibility beyond 1H23. SHW reaffirmed its base case to prepare for the worst as the Federal Reserve remains clear in its intention to slow demand to tame inflation.
- Specifically, the housing market is under considerable pressure. SHW predicts its new residential volume could take a 10-20% spill yr/yr in FY23.
- Meanwhile, the industrial slowdown occurring in Europe is cropping up in the U.S. across several sectors. Roughly 80% of SHW's annual sales stem from North America, a relatively resilient market during the current unfavorable economic conditions. Therefore, weakness kicking into gear in SHW's most prominent and recently sturdy market is ringing a few alarms today.
There were still a few areas of strength in the quarter. Adjusted EPS of $1.89 edged past analyst estimates, while sales grew nearly 10% yr/yr to $5.23 bln, in line with consensus. SHW was also confident that raw material costs would sink by a low to mid-single-digit percentage yr/yr in 2023. The company is also planning to open 80-100 new stores in the U.S. and Canada during the year. Additionally, SHW is on track to complete its targeted restructuring actions announced last quarter, resulting in around $50-70 mln in annual savings. It also plans to recommend an annual dividend increase of 0.8%, giving it a yield of 1.06%, at its next Board meeting.
Nonetheless, SHW's concerning 2023 outlook is hanging over the stock today. Conditions could improve as SHW progresses through the first half of the year, which is expected to be significantly more favorable than the back half. However, we believe it would be better to take a wait-and-see approach as a worst-case scenario could spur ongoing volatility in the share price over the near term.
IBM has investors feeling blue today with lackluster earnings/guidance (IBM)
IBM (IBM -5%) is heading lower today after reporting a slight EPS miss for Q4 with slight revenue upside. We also got our first look at 2023 guidance with IBM looking at constant currency (CC) revenue growth in the mid-single digits with Q1 being consistent with that. The one guidance metric where IBM provides a hard number is free cash flow (FCF). IBM reported $9.3 bln in 2022, which was below prior guidance of $10 bln. The 2023 guidance of $10.5 bln is light of street estimates, so a little disappointment there. Also, Bloomberg reported that IBM will cut 3,900 jobs.
- IBM has simplified its structure post-Kyndryl: Software, Consulting, Infrastructure. Software revenue was up 2.8% yr/yr (+8% CC) to $7.29 bln while Consulting revenue was up 0.5% (+9.3% CC) to $4.77 bln. IBM sees these two sectors as its growth vectors and represent over 70% of revenue. Infrastructure grew 1.6% (+7.4% CC) to $4.48 bln, but this segment ebbs and flows more on product launches.
- IBM had good growth across most geographies, with mid-single digit growth or better in the Americas, EMEA and Asia-Pacific. IBM says that, over the last several quarters, it has become clear that technology is playing a significant role in boosting productivity in the face of inflation, demographic shifts, supply chain challenges and sustainability requirements.
- A recent concern with IBM has been gross margin compression, but that was not the case in Q4 as non-GAAP gross margin improved to 58.6% from 58.0% a year ago. That was not a huge increase, but a welcome change after a decline in Q3 and Q2.
- Looking ahead to 2023, IBM did not seem as downbeat as MSFT did on its call. It sees Software in-line with the overall company's mid-single-digit CC model. Consulting is expected to see high-single-digit CC revenue despite lapping a robust +15% last year. Momentum from helping clients with their digital transformations should boost Consulting in 2023. The main headwind is expected to be Infrastructure, where CC revenue is expected to be below the mid-single digit model. That is because IBM is entering 2023 three quarters into the z16 cycle, so it is lapping a key product launch in 2022.
Overall, IBM ended 2022 on a bit of a down note. It was just a small EPS miss, but it was IBM's first miss in many quarters. Also, the FCF miss was disappointing and the 2023 FCF guidance was below street estimates. Granted, IBM is facing some fierce FX headwinds, but the numbers were a letdown. Gross margin expansion was probably the main positive. We still like IBM's new profile (post-Kyndryl) with a higher growth and a higher value mix, but macro headwinds seem to be blunting the benefit for now.
Tesla's price cuts putting a charge into January orders, easing widespread demand concerns (TSLA)
The intensifying demand concerns that sent shares of Tesla (TSLA) spiraling lower in 2022 are fading into the rearview mirror following the EV maker's encouraging 4Q22 earnings report. TSLA beat analysts' EPS estimates, despite a 446 bps contraction in automotive gross margin, but the main story centers on a surge in orders that were sparked by the company's recent price cuts.
- During last night's earnings call, Elon Musk stated that January has so far seen the strongest orders on a year-to-date basis in TSLA's history, and that orders are coming in at almost twice the rate of production.
- Simply put, the price cuts have been far more effective than many had imagined, validating TSLA's strategy to sacrifice margins in the near-term for volume and market share.
- A key aspect of the price cuts is that they made most of TSLA's models eligible for the $7,500 tax credit under the Inflation Reduction Act. When combined with the price discount, the tax incentive lowered the overall price by over 20% on some models. That's a meaningful decrease that expands TSLA's potential customer base.
- While Musk's gloomy macroeconomic outlook hasn't changed, with the eccentric CEO predicting a painful recession this year, he still expects 2023 to be a strong year for TSLA.
- Officially, the company guided for production of 1.8 mln vehicles this year, equating to yr/yr growth of about 37%. However, Musk revealed that internal projections are targeting production closer to 2.0 mln vehicles and that he wanted to remain conservative with the published guidance due to uncertainties regarding the supply chain and economy. Should TSLA produce 2.0 mln vehicles this year, that would equate to yr/yr growth of 46%.
- Of course, Musk's mission to bring Tesla EVs to the masses will come at a cost: namely, lower margins and profits. We saw this play out in Q4 as operating margin slipped by 120 bps sequentially to 16.0%.
- Looking ahead, more margin compression is likely, but the impact is perhaps not as severe as investors had anticipated. CFO Zachary Krikhorn soothed those worries by stating that FY23 automotive gross margin should remain above 20%.
- Further down the road, the next major growth catalyst is set to unfold in FY24 when the oft-delayed Cybertruck will finally begin mass production at the Austin, TX plant. By that time, it's also possible that margins could be experiencing some relief from lower commodity prices due to slower economic growth.
There are still plenty of challenges confronting TSLA, including rising competition in China from up-and-coming manufacturers like BYD Co. (BYDDY) and NIO (NIO), but the Q4 earnings beat and bullish commentary suggest that fears about slumping demand were mostly overblown.
Lam Research trades flat as headwinds remain and investors digest weak MarQ guidance (LRCX)
Semiconductor equipment giant Lam Research (LRCX) is trading relatively flat today as Q3 (Mar) guidance and management's commentary were not particularly inspiring. The company is also laying off roughly 7% of its global workforce, following along the lines of numerous firms operating in the tech sector lately.
Headwinds are aplenty for LRCX. The company is enduring a severe drop off in wafer fab equipment (WFE) spending by the industry, including Micron (MU), which announced it would slash FY23 (Aug) WFE spending by over 50% and expects FY24 WFE to contract even further. Meanwhile, LRCX has to deal with U.S. export restrictions on semiconductor equipment sold to Chinese firms, which will clip $2.0-2.5 bln off sales in CY23.
However, nothing substantially changed in Q2 (Dec) from the prior quarter. LRCX continues to see a significantly weaker demand environment in 2023, partly driving its decision to reduce its workforce. Customers across all segments are proceeding with caution this year, particularly those operating in the memory market. Inventory levels in NAND and DRAM remain high, causing customers to reduce new capacity additions and lower fab utilization levels. As a result, LRCX's Q3 guidance was lukewarm, expecting adjusted earnings of $5.75-7.25 and revs of $3.5-4.1 bln, representing yr/yr declines at their respective midpoints.
- On a lighter note, LRCX posted solid Q2 numbers when stacked against its targets. Adjusted EPS grew 25% yr/yr to $10.71, landing toward the high end of its prior range of $9.25-10.75. Likewise, revenue growth of 25% to $5.28 bln exceeded the midpoint of LRCX's $4.8-5.4 bln guidance. The robust sales growth helped operating margins surpass the center of LRCX's previous forecast, coming in at 32.1% in Q2.
- Supply chain constraints improved during the quarter, allowing LRCX to fill shipments of many critical parts required for revenue recognition. As these supply issues continue to ease, LRCX's deferred revenue balance will continue to decrease throughout MarQ as it fully completes back-ordered systems shipments.
- CEO Timothy Archer also shared an uplifting remark on how LRCX is positioning itself to benefit from a recovery in memory spending. Mr. Archer noted that the company is taking the necessary steps to become more nimble to respond to changes in demand than before the pandemic, setting its sights this year on the actions needed to achieve long-term objectives outlined in March 2020. That is, reaching $14.5-15.5 bln by CY24 and adjusted operating margins of 32-33%.
Bottom line, even though the market was not expecting a swift turnaround in WFE spending in 2023, with the stock climbing over 15% to start the year, LRCX was running into a higher risk of profit-taking on muted Q2 earnings. LRCX's Q2 report had positive aspects, but uncertainty remains elevated, especially with WFE spending possibly remaining suppressed even into 2024. LRCX did address this, noting that customers can only go so long before they must invest in the technology to move to that next node and gain the accompanying efficiencies. Nevertheless, this was insufficient to bring out enough bulls to push the stock meaningfully higher today.
|
