From Briefing.com: There were few surprises in the tech sector on Wednesday. As expected, when trading began it backed up a bit in response to the disappointing earnings report from Hewlett-Packard (HPQ 19.80 -2.31), and as expected, it quickly recovered as HP's issues were ultimately viewed as being company-specific. The latter, of course, is open for debate, but from our vantage point, that was the message in the market's resilience.
With the exception of some individual issues like HP and Network Appliance (NTAP 20.88 +2.83), there wasn't a great deal of leadership to either the upside or downside from an industry standpoint nor much conviction on either side of the ledger as evidenced by the light volume (NYSE 1.21 bln shares; Nasdaq 1.51 bln shares). Fittingly, there wasn't a whole lot of change in any of the indices. The tech sector, for its part, was a mixed bag - a point born out in the breadth figures, which were nearly even at the Nasdaq.
By and large, Wednesday was a day for the bulls to feel good about as the market stood its ground despite some negative jabs that, aside from the Hewlett-Packard outlook, included a disappointing report on mortgage activity in the week of August 15 and the yield on the 10-yr note backing up seven basis points to 4.44%. Concern over the latter, however, was offset by some conciliatory comments from Richmond Fed President Broaddus who acknowledged that he's more optimistic about economic growth, but that the Fed can continue to be quite accommodative if need be.
To be sure, the lack of convincing volume accompanying the recent gains makes it difficult to extrapolate if the trend will persist when trading desks are more fully staffed after this popular vacation period. Additionally, a bothersome sense of complacency is implied in the current standing of the VIX Index (19.71) and the low level of bearish sentiment (18.1%) reported in the latest investor sentiment reading. Thus, while the tech sector's, and the market's, resilience is laudable, it is still prudent for those with a near-term mindset to be somewhat skeptical of the sustainability of the recent rally. -- Patrick J. O'Hare, Briefing.com
5:54PM Wednesday After Hours price levels vs 4 pm ET levels: The after hours session echoes the regular session as the indices are trading slightly to the downside. Presently, the S&P futures, at 999, are 1 point below fair value, while the Nasdaq 100 futures, at 1300, are also 1 point below fair value. The tendency for the indices to consolidate their gains after the Nasdaq and Dow set new 52-week highs this week has outweighed a slew of generally better than excepted earnings reports.
To begin, Synopsys (SNPS 66.40 -1.79) beat the revised Reuters Research consensus EPS estimate by $0.02, at $0.82, after issuing Q3 (July) guidance that was above the consensus estimates of the time. Revenues rose 27% to $300.4 mln, and the company said that Q4 (Oct) revenues should be $305-320 mln. It added that EPS should be $0.77-0.84. Both forecasts were in line with consensus expectations; however, the stock has sold off _ in a profit-taking move. Synopsys also announced a 2-for-1 stock split in the form of a 100% stock dividend that would be paid on Sept 23 to all stockholders of record as of Sept 2.
Elsewhere, ADC Telecom (ADCT 2.19 -0.20) has also tumbled in the extended session despite a better than expected Q3 (July) report. The source of the market's malaise, most likely, lies in the global supplier of broadband network equipment's lower than expected Q4 (Oct) revenue guidance. ADC Telecom said it anticipated revenues of $180-190 mln, below the consensus estimate of $197 mln. The company did add, however, that it should be breakeven in Q4 which was in line with the Reuters Research estimate. Related companies include AV, CSCO, DOX, LU, and MOT.
Turning to the retail space, tween retailer Hot Topic (00C0 32.92 -0.33) reported a 38% increase in Q2 (July) EPS to $0.18 that was a penny ahead of the consensus estimate. Net sales rose 25% to $115.7 mln, due in part, to a 5.2% increase in comparable store sales. The stock has, however, not responded in kind, and fallen a bit in the after hours as traders look to book profits from HOTT's 33% run this year.
Similarly, shares of Men's Warehouse (MW 27.39 +0.47) have stumbled despite the company's encouraging Q2 (July) report. Net income rose to $0.29 per share (consensus of $0.27) from $0.19 last year, and total revenues rose 8% to $334.3 mln. The company guided Q3 (Oct) and FY03 (Jan) EPS in line with consensus estimates, saying Q3 should come in at $0.16-0.17 and FY03 should come in at $1.30-1.32.
As for tomorrow, the market will again contend with a number of retailers such as Claire's Stores (CLE), Foot Locker (Z), Krispy Kreme (KKD), Limited (LTD), and Wet Seal. Initial claims for the week of August 16 are also due out, and the consensus estimate calls a reading of 395K -- for the fifth straight straight week of sub-400K claims.
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar and Guidance pages. -- Heather Smith, Briefing.com
4:09PM OmniVision beats by $0.03; guides for Q2 (OVTI) 43.089 -1.73: Reports Q1 (Jul) earnings of $0.23 per share, $0.03 better than the Reuters Research consensus of $0.20; revenues rose 176.9% year/year to $46.5 mln vs the $42.1 mln consensus. Co. sees Q2 EPS of $0.22-0.23, R.R. consensus is $0.22 and revenues of $48-50 mln, estimate is $47 mln.
Close Dow -31.39 at 9397.51, S&P -2.05 at 1000.30, Nasdaq -0.57 at 1760.54: Most of today's session was spent on the defensive... On the back of four winning sessions, traders used Hewlett-Packard's (HPQ ) lower-than-expected Q3 (Jul) earnings of $0.23 (consensus $0.26) as an excuse to book some profits... Nevertheless, the market quickly realized that HPQ's problems were company-specific and encouraged by a lack of a material sell-off in the indices, as well as improving economic data of late and the generally upbeat Q2 earnings season, buyers used the dip as a buying opportunity and pushed the indices higher...
As a result, the S&P 500 and the Nasdaq spent the bulk of the afternoon drifting sideways with slight gains, while the Dow remained under wraps, largely due to the pullback in HPQ... The major averages weakened into the close and ended the day with mild losses, having made little headway through most of today's session... Among the session's top performers were the disk drive, gold, oil services, and utility sectors... Closing the session in the red were the semiconductor, defense, financial, drug, healthcare, and housing sectors... The latter was weak following yesterday's run-up and the latest report on mortgage activity...
Specifically, the Mortgage Bankers Association applications index slipped 11.0% in the week of August 15 with purchase applications falling to a 4-month low and the refinancing index dropping to its lowest level since July 2002... Elsewhere, the bond market closed the session with losses across the yield curve and the 10-year note down -18/32, with its yield at 4.43%... NYSE Adv/Dec 1720/1475, Nasdaq Adv/Dec 1623/1542
2:51PM OmniVision -- Earnings Preview 43.23 -1.58: In an initiation of coverage with an Equal Weight, Pacific Growth said that it believes OmniVision (OVTI) should have little trouble meeting firm's Street high forecast of $0.23 EPS and $45 mln in Q1 sales when it reports later tonight (consensus $0.20 and $42 mln). However, although firm expects solid July results and a bullish outlook for October to be reported tonight, Pacific Growth believes seasonality will drive January DSC revenues lower, and importantly, camera phone sales will not make up the difference, driving the JanQ below the OctQ, both in terms of revenues and EPS. Firm's initial EPS forecast for FY04 and FY05 of $0.89 and $0.95, respectively, illustrates the magnitude of the slowdown in growth that firm expects to take place.
2:08PM Dell Computer cutting prices as much as 22% on enterprise-class products (DELL) 32.53 -0.28: Co announces price reductions on popular enterprise, small-medium business and consumer products by as much as 22 percent.
1:16PM Photronics estimates, price target raised at ThinkEquity (PLAB) 22.66 +3.68: -- Update -- ThinkEquity raises its FY04 est to $0.97 from $0.74 and increases its price target to $29 (from $23), reflecting firm's view that PLAB can achieve peak net margins of 10% in the next cycle.
11:37AM Advanced Micro target upped at JMP Securities (AMD) 9.26 +0.03: JMP Securities is upping its price target on AMD to $15 from $8 based on moderately bullish view on the semiconductor industry for PC, server, and cell phone market growth in 2004. With AMD now being cash flow positive and the outlook for moderating capital spending, firm believes stock can trend toward 10-yr mean multiple of 1.2x forward sales, roughly $15. Firm maintains its Strong Buy.
9:36AM Cabot Micro started with a Buy at Lehman; target $79 (CCMP) 65.50 -0.45: While CCMP has historically focused on slurry, it has increased efforts in other segments, notably pads, which represent a $215 mln mkt opportunity. Firm sees upside for CCMP here. Lehman's $79 tgt is based on a multiple of 33x CY04 est.
10:38AM EMC Corp (EMC) 11.96 +0.34: RBC Capital Mkts upgrades Sector Perform to OUTPERFORM. Cites possibility of a stronger than expected summer quarter based on strong EMC-specific trends
Prudential starts coverage of semis : Prudential initiated coverage on semi names INTC, BRCM, ADI, TXN, XLNX with Buy ratings and STM, PMCS, MXIM, MRVL, ALTR, AMD, LLTC with Hold ratings
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