From Briefing.com: 4:12PM Agilent tops estimates (A) 13.62 -0.18: Reports Q4 (Oct) net of breakeven, $0.12 better than the Multex consensus of ($0.12); revenues rose 8.1% year/year to $1.74 bln vs the $1.55 bln consensus; first quarter revenue is expected to be in the range of $1.5 billion to $1.6 billion -- Multex consensus estimate is for revs of $1.53 bln.
2:55PM : The bias of the market has deteriorated slightly in recent action with the leading semiconductor sector (SOX +1.4%) slipping more than 2% off its intraday high. Potentially weighing on the group this afternoon is commentary from Salomon Smith Barney. The firm expects 16% sequential unit growth for Q4 motherboards, lower than the normal seasonality of +20%; sees no cyclical pickup on PC upgrades; expects DDR prices to fall as MU, IFX, Samsung, Hynix, and Taiwanese co's increase supply and doesn't think SDRAM prices will rise. They do feel, however, that Q4 will be the order bottom at down 15%.
2:25PM Solly comments on semi outlook : Sources tell us that Salomon Smith Barney gave the following comments on semis during their Asia tech call: 1) firm expects 16% sequential unit growth for Q4 motherboards, lower than the normal seasonality of +20%; 2) sees no cyclical pickup on PC upgrades; 3) expects DDR prices to fall as MU, IFX, Samsung, Hynix, and Taiwanese co's increase supply; 4) doesn't think SDRAM prices will rise; and 5) thinks Q4 will be the order bottom at down 15%.
1:42PM Kulicke & Soffa (KLIC) 4 -0.01: Company's Q402 results, reported Friday before market open, came in-line with Multex consensus of loss of $0.35 on higher than expected revenues of $122 mln; while shares appreciated almost 6% in Friday's session, they have begun to lose ground today on lackluster comments from analysts. CSFB is encouraged by management streamlining business, but thinks profitability outlook mitigates upside and sustained multiple expansion is dependant on continued demand recovery and management executing to plan in difficult environment. Soundview Technology thinks downside is limited from current levels, but maintains that turnaround is still not visible due to lack of sustainable end-market demand; nonetheless, believes current under-investment in back end will cause next upturn to be steeper than previous.
12:52PM Texas Instruments (TXN) 17.27 +0.88: As we noted the other day in our Tech Stocks General Commentary, the tech sector has been at the lead of the market's recovery off the October lows. One industry within tech that has easily outperformed the major averages is the chip group. Though lagging behind other tech-related industries such as Wireless and Networking, the Philadelphia Semiconductor (SOX) index is up nearly 50% in less than six weeks.
Investors have been a little more gun shy about returning to the beleaguered chip industry given the soft PC market, weak pricing conditions and limited earnings visibility. However, it's important to remember that the semiconductor industry is cyclical in nature. This reality was clouded in the late 90s, when chip stocks took on characteristics of growth companies. Nevertheless, investors should treat these stocks much as they do other cyclical companies - and that is buy quality names when they are near multi-year lows, as they inevitably bounce back.
For investors considering dipping into the chip group, Texas Instruments (00C) is one stock that Briefing.com contends is worthy of consideration. TXN enjoys strong brand awareness, dominates its marketplace, sports a clean balance sheet and benefits from a strong and experienced management team. As a result, TXN is well positioned to bounce back once macro-conditions improve.
Technically, TXN is already beginning to bounce back (see chart). After spending the past couple of months building a base off its lows, TXN finally broke above its 50-day moving average during today's session - and it did so decisively. Fact that stock took out pivotal resistance on decent volume growth suggests that TXN is poised for additional near- to intermediate-term gains. Next resistance of note not until the 22-23 area, or 27%-33% above current level.
Fundamental argument for the stock not as compelling, but that's not unusual for cyclicals -- as the time to buy them is when they are out of favor and earnings have yet to ramp. TXN is expected to see earnings climb from $0.18 in FY02 to $0.28 in FY03, with revenues climbing from $8.3 bln to $8.9 bln. Nothing great but not bad considering overall industry conditions.
Briefing.com also notes that technicals often foretell a change in a company's underlying fundamentals, which is why we are so encouraged by TXN's recent price behavior. If price action continues to improve, don't be surprised if TXN ups its earnings predictions going forward. With 17 of the 24 analysts providing coverage on the stock rating it Neutral (15) or worse (2), any improvement in industry conditions/earnings outlook will trigger a wave of ratings upgrades. The combination of better-than-expected earnings and ratings upgrades can be a powerful catalyst for a stock.
In sum, TXN's stands to benefit over the intermediate to long-term from its solid financials, leadership position within industry, improved technical outlook and emerging group relative strength. Meanwhile, with most of the bad (industry) news already in the marketplace, and with the stock trading just off new multi-year lows, the downside risk is limited. This is just the kind of risk/reward equation investors want to be looking for when sifting through the tech rubble for long-term bargains. -- Robert Walberg, Briefing.com
12:01PM RF Micro Device sees Q3 rev at high end of guidance (RFMD) 9.86 +0.69: We are hearing that RFMD gave Dec qtr rev guidance of $132 mln at the Lehman semi conference today, which is at the high end of their Oct 15 rev guidance of $128-$132 mln and slightly above consensus of $130.4 mln.
11:37AM Flextronics: cautious comments from CIBC (FLEX) 9.49 +0.02: CIBC says they are inclined to take profits in FLEX now; although firm expects the co to reit Dec guidance during their update on Nov 21, the Mar qtr is seasonally the weakest and may not look as strong when compared to peers.
9:58AM Technical Levels : So when we reviewed the Nasdaq on Friday, November 15th, we suggested the index may be due for a period of consolidation. We noted that the index was coming off a three-day rally of 92 points, which amounted to a quick 7.0% gain for the index. Well as it turns out, the Nasdaq finished Friday essentially unchanged on the session at 1,411.14. For those of you with a taste for minutiae, the Nasdaq finished Friday with a 0.38-point loss on the session -- or less than one point lower versus Thursday's close at 1,411.52.
At this point, it should be relatively clear that the index is coming up on its third recent test of straight-line resistance in the range of 1,419 to 1,423. We've been laser focused on this level as it coincides with three points of interest over the prior five years -- 1) the September 11th-induced reaction lows which bottomed at 1,423, 2) the reaction lows of October 1998 which bottomed at 1,419 and 3) the ordinary course of its original uptrend during the Summer of 1997. Also note that of more immediate interest, this area also happens to mark -- almost precisely -- the top of the prior leg higher which closed on August 22nd at 1,422.95. Now keep in mind that we first targeted this overhead ranging from 1,419 to 1,423 as far back as October 17th or almost exactly a month ago.
Yet this straight-line resistance at 1,423, also ties into another interesting aspect of the present technical picture -- namely, the way its chart is taking shape. The Nasdaq now appears to be in the handle of what should soon become a crude cup-and-handle formation. The cup component to this pattern begins back in mid-August and runs through early November. The sides of the cup are at index levels in the very tight range of 1,419 to 1,423, while the base of the cup ranges from 1,108 to about 1,250. If the cup and handle pattern does materialize, the handle will be signified by the pullback from 1,419 to approximately 1,319. That more recent 'higher low' of 1,319 indicates buy interest is presently exceeding sell pressure. Also note that when we reviewed the Nasdaq on Tuesday, November 12th -- at the bottom of that cup with the index at 1,319 -- we were looking for the markets to turn higher.
Now the cup-and-handle often signifies the formation of a technical base from which a subsequent move higher can be made. While the current picture looks reasonably favorable as it is, those with a more cautious approach may want to watch for a close over the 1,423 level before going aggressively long. A close over the 1,423 level would signify a clean break of key resistance -- it would also represent its best close since July 5th.
So where does all this leave us? For the time being, we'll maintain our consolidative bias within the context of a broader move higher. Much of the support for our recent bias to the upside was covered in our November 6th discussion of the 10-day Bollinger bands. Just remember that the Nasdaq is dangerously close to that closing break of 1,423. Should that break occur on a closing basis, it would trigger a technical buy signal for many participants as it represents a new four-month high in addition to a break of key resistance. If the Nasdaq should break 1,423 on the close, the immediate bias is higher and keep in mind that the move could be significant -- our intermediate-term target would become 1,500 to 1,520 which happens to bracket the Nasdaq's 200-day simple moving average at 1,510.
All of which leads us to the straight technical levels. For the time being, continue to look for Nasdaq 1,411 to serve as a near-term pivot point -- this represents the closing level of the prior two sessions. On a break lower, keep an eye on initial support at congestion we've been watching in the range of 1,394 to 1,401. That's followed by additional support at chart congestion around 1,380 and a more notable floor at the bottom of a former gap at 1,360. So broadly speaking, this suggests the index should have notable support in the broad range of 1,360 to 1,380.
To the upside, the Nasdaq is situated for a key test of very important overhead at 1,419 to 1,423. This is a level we've already addressed ad nauseam as it brackets the September 11th-induced reaction lows that bottomed at 1,423, as well as the reaction lows of October 1998 which bottomed at 1,419. Once again, if the index should successfully navigate 1,423, the immediate bias becomes decidedly bullish -- at that point it will be time to look for less significant but notable resistance in the range of prior chart congestion at 1,448 to 1,452. -- Mike Ashbaugh, Briefing.com
8:20AM Silicon Image cut to Buy at Needham on valuation; target $8 (SIMG) 7.42:
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