From Briefing.com: General Commentary - So far the decline off the recovery highs has been within the normal parameters of a mild correction. In other words, nothing to get worried about. Or is there?
Though key supports have held until now, we are concerned by a number of factors. First, the bellwether SOX index is falling at a more rapid pace than the rest of the sector - never a good sign. Again, index has yet to fall back below its 50-day moving average, but given the bleak earnings outlook and the sloppy technical tone a test of this floor in the next few days is highly likely. Should the index break below this floor (269.59) would be a decidedly bearish signal for rest of the sector.
Briefing.com is also concerned by the market's complacency over the Q4/Q1 earnings outlook. Stocks rallied sharply, in many cases by more than 40%, despite fact that most companies offered very dour forecasts for IT spending over the next 6-months. Considering that many on the street were predicting a sizeable earnings recovery over the next few quarters, we think future estimates still need to come down. And as they do, stock prices most likely to follow.
Finally, the headlines are shifting from positive to negative- with the ongoing risk of war in Iraq at the top of the list.
Not sure how far indices will slide during this correction, but until investors have better visibility on these issues and until the market proves it can hold at major support levels, Briefing.com sees no reason to be aggressive on the long-side.
Robert Walberg
4:59PM Vishay put on ratings watch negative by S&P (VSH) 10.25 -1.00:
4:23PM Motorola reiterates Q4 guidance (MOT) 8.43 -0.37: -- Update -- Reiterates Q4 guidance of $0.10 in EPS and $7.1 bln in sales, which matches consensus.
3:58PM UBS Warburg on Global Telecom : Given recently experienced liquidity crunches that have caused Alcatel (ALA 4.58 -0.28), Ericsson (ERICD 8.54 -0.06), Lucent (LU 1.07 -0.14), and Nortel (NT 1.18 -0.19) to make numerous structural and financial changes, firm updates financial positioning by examining current financial resources and uses for next 26 months; thinks ALA can maintain sufficient liquidity for next two years with more than $1 bln in cash at end of Y04, looks for possible upside to cash forecasts; foresees limited risk for ERICD to raise additional cash after recent rights issue, but if estimates are not met, looks for additional financing round; despite weakening fundamentals, believes LU's liquidity situation is stabilizing; maintains that it will have enough liquidity into Y05; thinks NT has significantly improved liquidity outlook due to improved gross margins, reduced vendor financing commitments and cash raised from equity financing. Firm raises price targets on LU and NT based on improved liquidity outlook.
3:57PM Intersil says current quarter trends are strong (ISIL) 16.25 -0.52: UBS Warburg says that ISIL indicated at the firm's telecom conference that current qtr trends were very strong, and that the co is tracking at or above $0.20 in EPS and $197 mln in revs (in-line with consensus); wireless LAN and PC motherboard activity is strong, and Elantec inventory issues are behind the co.
3:32PM Oracle CFO reaffirms Q2 forecast (ORCL) 9.23 -0.32: -- Update -- We are hearing from traders citing Bloomberg that ORCL's CFO reaffirmed the co's Q2 forecast of $0.08-$0.09 in EPS and a rev decline of 4-7%.
2:55PM Salomon Smith Barney on PC Demand : Firm's Richard Gardner says PC shipments are likely to increase 10-15% sequentially in Q402 vs prior expectations of up 5-10% and typical seasonal rise of 18-20%; better than anticipated October is attributed to later-than-normal holiday channel fill, increased purchasing power of European companies due to weakening Euro, snap-back following HP's multi-quarter channel inventory correction, and potential channel inventory build. Despite encouraging data, firm thinks it is too early to judge consumer demand trends; based on recent appreciation, does not suggest chasing shares on strength associated with October motherboard data
2:52PM PLAB -15% resumes trading after warning 9.97 -1.75:
2:30PM Photronics cuts Q4 guidance (PLAB) 10.97 halted: Lowers Q4 forecast to a pro forma loss of $0.08-$0.11 and $90 mln in revs, vs consensus of a loss of $0.03 on $93.4 mln in revs; co attributes sluggish end mkt demand and the difficult transition to the 130 nanometer technology node for the shortfall.
1:43PM Oracle (ORCL) 9.21 -0.34: Company is the target of overwhelmingly negative sentiment in today's session. Aside from Deutsche Securities' downgrade to HOLD from Buy (see In-Play for details), UBS Warburg comes forward with cautious comments sparked by Friday's announcement of changes in sales force leadership; thinks with 22 days left until end of Q203, timing could not be worse; also, concerned with news of Mark Barrenechea going on extended leave; does not expect him to resurface with company, adding to growing list of long-time ORCL executives to have left company over past two years; maintains Hold rating and Y03 EPS estimate of $0.36, $0.03 below Multex consensus. Shares have dipped 3.6% on cautious note and downgrade.
1:42PM Nasdaq holds 20-day exponential moving average : -- Technical -- To this point in the session, the index has managed to hold its 20-day exponential moving average at 1,326. To the upside, watch for initial resistance at 1,336 followed by additional overhead at 1,340 and 1,347. To the downside, continue to look for support at 1,326 followed by a subsequent floor at 1,320.
12:54PM Hewlett-Packard: Pru sees Capellas resignation as negative (HPQ) 15.03 -1.65: -- Update -- Prudential views the resignation of HPQ President Michael Capellas, and the statement that the position will not be filled, as negative developments; moreover, since Capellas had a loyal following among former Compaq staff, firm believes his resignation increases the risk that some of these people may leave too. Maintains Buy rating and $24 price target.
12:34PM Semiconductors hold towards session lows : -- Technical -- SOX holds towards session lows -- currently trading at 286 which approximates intraday support, watch for subsequent support at 279 followed by its 50-day simple moving average at 270. To the upside, look for initial overhead at 288 followed by additional overhead at 295. Sector components contributing to the move include: ALTR, NVLS, KLAC, AMAT, LLTC, AMD, MXIM, XLNX.
12:16PM Intel to cut chip prices - Merrill Lynch (INTC) 17.56 -0.59: Joe Osha at Merrill Lynch says that checks indicate INTC intends to implement a series of price cuts later today on their high-end processors, which is in-line with expectations; also, firm believes that the co intends to cut Celeron prices as well; reiterates Neutral rating.
12:05PM Juniper Networks estimates cut at Buckingham (JNPR) 6.08 -0.53: Buckingham cuts FY02-03 ests for JNPR, saying recent channel checks indicate that the co is unlikely to win sales from trialing Unisphere edge switches at VZ (which firm had valued at under $5 mln) due to compatibility issues; cuts FY02 rev/EPS est to $534 mln/($0.04) from $543 mln/($0.03) and FY03 to $530 mln/($0.08) from $568 mln/($0.04), both below consensus.
CLTK Celeritek reduces Q3 outlook (7.04) Co reduces revenue expectations beginning in Q3 because Motorola, a primary buyer of Celeritek's power amplifier modules, has decided to discontinue its strategy of dual sourcing power amplifier modules. CLTK now sees Q3 revs of $10-$11 mln (Multex consensus $13.2 mln). CLTK expects the effect on revenues will be more significant beginning in Q4. MOT accounted for 43% of co's revs in 2002.
DELL Dell Computer: Bear Stearns reiterates Outperform rating (29.79) Bear Stearns reiterates their Outperform rating on DELL, saying results should come in at or slightly better than its pre-announcement of $9.1 bln in rev and $0.21 in EPS; while the stock is not cheap relative to peer group, firm sees potential upside to $30-$35.
NSM National Semi estimates raised at Solly (13.50) Salomon Smith Barney raises ests for NSM, saying turns business in the past month or so has improved meaningfully with a broad-based pickup in demand; raises FY03 est to breakeven from ($0.25) and FY04 to $0.45 from $0.15 (both in-line with consensus), and raises price target to $15 from $10.
TSM Taiwan Semi downgraded at Goldman Sachs (8.68) Goldman Sachs out of Asia downgrades TSM to In-Line from Outperform, saying aggressive assumptions suggest there is further downside to the stock; raises price target to $6.60. Firm maintains Neutral stance on the sector, and would reduce holdings in Asian foundry, DRAM, and back-end stocks.
7:42AM Lehman raises IT sector weighting : Lehman increases their IT sector weighting for the first time in nearly a year, to 16% from 6% (vs the S&P 500 at 15%); thinks the major message of the Fed's surprise rate cut is that the new level of real short-term interest rates, -0.75%, is one associated with sustainable stock mkt rallies and profits recoveries.
7:18AM Oracle cut to Hold from Buy at Deutsche -- valuation (ORCL) 9.55: Deutsche Securities downgrades ORCL to Hold from Buy based on valuation, but raises price target to $9.70 from $9; if valuations for the group hold up heading into Q1, firm believes most stocks should pull back on a trading basis due to cautious 2003 guidance and the fact that March will be a seasonally weak qtr; recommends taking profits in SEBL, DCTM, MANU, and VAST; believes biz intelligence sector (COGN, BOBJ) will outperform over next 12 months.
7:17AM Infineon cut to Hold from Buy at Deutsche -- valuation (IFX) 9.51:
finance.yahoo.com^SOXX+ALTR+AMAT+AMD+BRCM+CLTK+DELL+HPQ+IFX+INTC+ISIL+JNPR+KLAC+LLTC+LSCC+LSI+MOT+MU+MXIM+NSM+NVLS+ORCL+PLAB+TER+TSM+TXN+XLNX+^VIX+VSH+^IXIC+^SPX&d=t
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