From Briefing.com: General Commentary - This is the week we transition from warnings to earnings season, and in the tech sector the chip industry typically comes to bat first. Rambus gets things started when it reports on Wednesday, with INTC AMCC, LLTC, MOT, NVLS, RFMD, TER, AMD, CY, ATML, CREE, LRCX, PMCS, XLNX among the names to follow next week.
One look at the Philadelphia Semiconductor (SOX) index tells pretty much the entire story regarding market expectations for the group... Seminconductor index has been in a steep downtrend for most of the year, amid evidence of soft demand and numerous sales/earnings disappointments. While underlying fundamentals aren't expected to change much in the days ahead, it is important to note that SOX established another new multi-year low in yesterday's session. Index is also fast approaching key support in the 210-200 range.
In other words, it looks to Briefing.com that most of the bad news for the immediate future is priced into the group. Investors no longer looking for a miracle Q4 to save the group/sector. Expectations for a recovery continue to be pushed out into the early to middle part of next year.
With stock prices already reflecting much of the market's pessimism regarding the industry/sector, now isn't a bad time to consider going the long the group - at least from a trading perspective. Barring across the board brutality in the numbers, chip sector likely to experience a much needed bounce. Might not be start of new bull market, but at this point investors in the group simply want the bleeding to stop.
Of course, chip sector often acts as a barometer for rest of tech sector. Consequently, how the group responds to the earnings news/conference calls over the next 10-14 days will largely determine the course of the SOX and the Nasdaq for the balance of the year.
Robert Walberg
5:32PM After Hours Monday Price changes vs the 4 pm close: Although the market averages extended their losing streak to four days, the after hours bias was slightly favorable. Overall trade was limited in scope as earnings season has yet to kick in.
One company that did report earnings was Entegris (ENTG -18.8%). For Q4 the company beat the EPS consensus by $0.01 with revenue also slightly above the consensus ($63.6 mln vs $62.9 mln). However, the company now expects sales for the next fiscal quarter to decline by about 20 percent from our last fiscal quarter. The consensus estimate is for sales of $67.0 mln.
IRF indicated that revenues are now expected to be approximately $211 mln, up 5% sequentially and at the midpoint of company guidance vs the consensus estimate of $209.5 mln.
4:36PM Intl Rectifier updates guidance (IRF) 15.24 -0.22: Says revenues are expected to be approximately $211 million, up 5% sequentially, "the midpoint of company guidance"; Multex consensus estimate is for sales of $209.5 mln.
4:09PM Entegris beats by a penny; guides lower (ENTG) 6.28 -0.72: Reports Q4 (Aug) earnings of $0.06 per share, $0.01 better than the Multex consensus of $0.05; revenues rose 20.7% year/year to $63.6 mln vs the $62.9 mln consensus; expects "sales for our next fiscal quarter to decline by about 20 percent from our last fiscal quarter" -- Multex consensus estimate is for sales of $67.0 mln.
3:38PM Cisco Systems (CSCO) 8.97 -0.49: Stock hits a new 52 week low in weak Nasdaq session .. Goldman Sachs contributes to losses by cutting Q1 ests to down 3% from flat; also lowers their 2003 revenue/EPS ests to $19.9 bln/$0.54 from $22.1bln/$0.63 due to their lowered expectations for both IT spending and carrier capex in 2003; industry checks suggest further weakening in order trends for CSCO and a worsening macro IT environment. Goldman sees limited near-term catalysts for stock but rates valuation as attractive; notes that their no growth discounted cash flow model suggests a $9 value.
3:04PM Semiconductors hold towards session lows : -- Technical -- Currently trading at 222, look for initial support at 220 -- a break below 220 would mark a new multi-year low for the SOX. To the upside, watch for initial resistance at 225 followed by additional overhead in the area of 232. Sector components contributing to weakness include: NSM, XLNX, TER, ALTR, AMD.
2:41PM Lehman cuts estimates for Xilinx & Altera : Dan Niles at Lehman cuts Dec qtr and 2003-04 ests for XLNX and ALTR based on slower growth expectations from key end mkts as well as "somewhat aggressive" Street ests. Given continued bearish sentiment and high valuations relative to customers, firm would stay on the sidelines.
2:15PM Oracle (ORCL) 7.95 -0.25: Stock remains under pressure following remarks made by the CFO in Europe last Friday: news article cites Jeff Henley as saying "...the European tech sector is now being hit by the sharp decline that has ravaged the U.S. for more than a year." UBS Warburg believes CFO's comments were significantly more cautious about Europe than they were 2 weeks ago on the co's Q1 earnings call (where Henley conceded Europe had missed their numbers for the qtr but said he expected a "bounce back" in Q2). Firm reiterates their below consensus view of $0.36 vs. consensus at $0.39; adds that ORCL's full year estimates appear to be too high.
1:45PM Semi Equip : Stocks move off their lows in mid-day rally despite price target cuts by Soundview: lowers KLAC to $35 from $50, NVLS to $25 from $35, LRCX to $13 from $21, and NANO to $8 from $10. Firm believes cos continue to be burdened down with customer slowdowns and cancellations and is modeling 20-30% declines in orders for Sept, followed by another double-digit decline in Dec.
1:31PM EMS Stocks : Group is largely discounting another round of est counts by Lehman Brothers; firm cuts EPS ests, revenues, multiples, and price targets for JBL, FLEX, PLXS, and SANM on their belief the sector may not see much of a sustained recovery for 3-5 qtrs ... believes their recent cuts on CLS and SLR are conservative enough. Lehman maintains their Neutral rating on the group citing that improvement to margins and earnings will come slower than their prior 2003 forecast.
11:20AM Cisco Systems: visibility from customers getting "tighter" (CSCO) 8.95 -0.51: Dow Jones reports that CEO John Chambers said at a conference today that "visibility from customers is getting tighter" and that a service provider recovery will lag the IT recovery; in addition, he said that CSCO will likely partner with VRTS and sees more competition from DELL.
11:04AM Technical Levels : While September was a difficult month for the markets, the month of October is off to an inauspicious start as well. On Friday, we had the Nasdaq hitting six-year lows, while the Dow was coming down towards new four-year lows at the same time.
The Nasdaq finished last week just under 1,140 placing it 'comfortably' off its all-time high of 5,132. Put another way, the index remains in the midst of a massive 3,992-point pullback, and on an intraday basis, has managed to make it a round 4,000-point decline. When taking the broader view of the markets, the conventional terminology almost doesn't sound right at this point. Is it a 4,000-point 'retracement' now, or do you just go ahead and call it a market crash?
Regardless of the terminology, there are several different ways to quantify the current bear market. On the one hand, the retracement itself -- at 3,992 points -- is well over three times the size of the current index value. From the standpoint of percentages, the Nasdaq is 78% off its all-time high which means conversely that the 'aggregate index asset value' is a mere 22% of what it had been 30 months ago.
The 'aggregate index asset value' you ask? Why not just call it the index? Well, the index is an abbreviation by definition -- it's designed to give a quick read on the health of the market. Yet with all the numbers and charts that get tossed around here and elsewhere, it's easy to lose sight of the fact that the indices serve as a representation of real assets. These aren't simply paper losses and this isn't simply about the stock market. The total 'asset' value of the Nasdaq is 22% of where it stood 30 months ago -- 78% of that asset base has been vaporized.
From the standpoint of the straight technicals, the Nasdaq posted its sixth straight weekly loss last week -- carving out yet another bearish candlestick To the downside, this is more a matter of the the index carving out a new near-term bottom rather than any real reliance on pre-existing support. To the upside, look for modest initial resistance at 1,160 followed by a more significant area at 1,180. Those two levels are followed by a more important area on a longer-term basis. Namely, the index' 20-day exponential moving average -- currently at 1,213 -- which will need to be cleared before we see anything resembling a meaningful leg higher. -- Mike Ashbaugh, Briefing.com
8:29AM Broadcom cut to Hold at Pru; price target $9 (BRCM) 10.11: Prudential downgrades its Communications Semiconductor rating to MKT UNDERPERFORM from Mkt Outperform. On an individual basis, firm cuts BRCM, TUNE, CY, LSI, EMKR to HOLD from BUY. For BRCM, cuts 2003 est to $0.05 from $0.15 and lowers price target to $9 from $20 (based on 2.5x price/sales).
8:02AM ASML Holding cut to Sell at UBS on valuation (ASML) 6.00: UBS Warburg downgrades to SELL from Hold on view that concerns over debt repayment and uncertainty over 300 mm/SPE demands are likely to be the main drivers of the share price in coming months. Notes that ASML remains 25% above past trough on EV/sales (1.4x, Sept 1997).
7:49AM Oracle expects European recovery in late 2003, sees tough conditions near-term (ORCL) 8.20: Traders citing Bloomberg are telling us that ORCL said in Seville that the co expects a recovery in European sales in 2H03 after a rebound in the US; on the other hand, the Financial Times reports that ORCL CFO Jeff Henley says he cannot see the tech sector getting any better in the short term as corporate scandal and economic uncertainty continue to undermine any signs of a recovery.
7:47AM Intel sees PC market improving in early 2003 (INTC) 13.72: Traders citing Bloomberg are telling us that INTC CEO Craig Barrett told a tech conference in Seville yesterday that he expects a recovery in the PC industry in early 2003, after an improvement in the economy. In addition, Barrett said he doesn't expect to see much of a recovery in the communications mkt until the end of 2003 or 2004.
7:32AM Merrill left holding unsold Chartered Semi issue, JP Morgan to lay off 4k more workers : The Financial Times reports that Merrill Lynch looks set to become an unwilling 18% shareholder in CHRT today after a $633 mln rights issue it underwrote for the troubled state-owned chipmaker fell flat. Separately, the Wall Street Journal reports that JPM plans a new round of layoffs of up to 4000 people.
finance.yahoo.com^SOXX+AMCC+ALTR+AMAT+AMD+ASML+BRCM+CHRT+CLS+CREE+CSCO+CY+EMKR+ENTG+FLEX+INTC+IRF+JBL+JPM+KLAC+LLTC+LRCX+LSCC+LSI+MOT+MU+MXIM+NANO+NSM+NVLS+ORCL+PLXS+PMCS+RFMD+SANM+SLR+TER+TUNE+TXN+XLNX+^VIX+^IXIC&d=t
Bill what RIMM did here is probably just the tip of the iceberg. Sad, truly sad.
RtS |
