From Briefing.com: The tech sector kept up its winning ways on Thursday, and for good reason, as a batch of economic data fortified the bullish argument that economic activity is destined to accelerate in the months ahead. In particular, weekly initial claims came in below the key 400K level for the fourth time in the past five weeks, the July index of Leading Indicators rose 0.4%, marking the fourth consecutive month of gains, and the Philadelphia Fed Index checked in at 22.1 (consensus 10.0) with the 6-month outlook reaching a decade high of 62.0. For good measure, a report that Iraq's "Chemical Ali" was captured by U.S. troops contributed to the positive outlook.
As if that wasn't good enough to keep the tech fires burning, there was yet another favorable call on the white-hot semiconductor sector. This time, Lehman Bros. upgraded its sector view on European Semiconductors and Equipment to Positive from Neutral based on what it said was the coincidence of favorable trends on both the supply and demand side. Not surprisingly, semiconductor stocks rallied on the report with the SOX Index advancing 3.2%. From its intra-day low on Aug. 8, the SOX is up 19.0%, but that is small change compared to the 108% gain since its October low.
By the way, the SOX Index hit a new 52-wk high on Thursday, as did the Nasdaq Composite, which eclipsed the former recovery high of 1776.10 reached in July. The new high occurred on 1.73 bln shares, which isn't heavy, yet it is the heaviest level since Aug. 6. Breadth figures again favored advancers by a wide margin and the number of issues hitting new 52-wk highs trounced those hitting new lows. That doesn't mean we can't still have our reservations about the sustainability of the latest tech surge, but there is little denying that momentum to this point is on the side of the bulls and that the economic indicators bode well for the long-term outlook.-- Patrick J. O'Hare, Briefing.com
6:15PM Thursday After Hours price levels vs. 4 pm ET levels: A winning session in the cash market is being followed by lackluster trade in the after-hours. Presently, the S&P 500 futures are trading 0.7 below the fair value of 1003 and the Nasdaq futures are 2 points below the fair value of 1316.
Nevertheless, today's earnings reports are by and large better-than-expected. First up is Marvell Technology Group (MRVL 39.90 +1.54), a global semiconductor provider of broadband communications and storage solutions. Revenues in Q2 (Jul) rose 61.2% year/year to $192.9 mln versus the $186.4 mln consensus. The company doubled its EPS year/year and reported Q2 pro forma earnings of $0.22 per share, $0.01 above the Reuters Research consensus of $0.21. Shares used in computing pro forma net income per share for this quarter increased to 136.8 mln, compared with 129.6 mln for the same quarter last year.
Also higher in the after-hours session is provider of television services for digital video recorders, TiVo (TIVO 10.75 +1.05). TIVO reported Q2 (Jul) loss of $0.07 per share, $0.06 better than the consensus. The services and technology revenues fell 27% year/year to $17.4 mln versus the consensus of $16.5 mln despite that fact that the company added a record 90K subscriptions in Q2, twice the number of subscriptions added in the same quarter of last year. Looking forward to Q3, the company said it now expects revenues of $16.5-17.5 mln, below the consensus of $17.9 mln. However, TIVO is increasing subscriber guidance for the year and now expects to add 550-650K new subscriptions in FY04. Accordingly, the company narrowed its expected revenue range to $65-70 mln versus the previous guidance for revenues of $62-70 mln. The current consensus for FY04 revenues if $70.8 mln.
Another techie reporting earnings is Novell (00C0 4.02 +0.25). The computer networks player checked in $0.04 above the Reuters Research consensus, with Q3 (Jul) non-GAAP earnings of $0.02 per share, excluding a $26 mln restructuring charge, $24 mln charge for impaired intangible assets, $8 mln in charges for impaired investments, a gain on the sale of real estate of approximately $25 mln, and the related tax effects of these items. Revenues rose 0.2% year/year to $282.8 mln versus the $279.0 mln consensus.
On to some retailers, Nordstrom (JWN 26.00 +2.00) is quite the mover in the after-hours session. The company reported Q2 (Jul) earnings of $0.48 per share, which was $0.09 above the consensus and up 23% compared to the same quarter last year. Net sales of $1.79 bln were up 8.4% year/year and above the consensus of $1.75 bln. Going forward, the company sees Q3 EPS of $0.16-0.20 (consensus $0.16) and FY03 EPS of $1.33-1.37 (consensus $1.23).
Specialty retailer, Gap (GPS 20.19 +0.54) also checked in above expectations. Specifically, the company reported Q2 (Jul) earnings of $0.22 per share, a penny above the consensus. Net sales rose 12.8% to $3.69 bln, compared with $3.3 bln for the same period last year. Comparable store sales were up 10%, versus a decrease of 7% for the same period last year.
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar and Guidance pages. -- Victoria Glikin, Briefing.com
4:08PM Marvell beats by $0.01 (MRVL) 38.31 -0.08: Reports Q2 (Jul) pro forma earnings of $0.22 per share, $0.01 better than the Reuters Research consensus of $0.21; revenues rose 61.2% year/year to $192.9 mln vs the $186.4 mln consensus.
3:30PM Marvell -- Earnings Preview (MRVL) 38.27 -0.12: -- Update -- Marvell reports Q2 after the close with Reuters Research earnings expectations of $0.21 per share and revs of $186.4 mln. ThinkEquity Partners expects upside going into the earnings announcement and believes recent concerns over competition in the GbE and HDD markets is "overblown". In his preview, the analyst raised his estimates and price target to $40 ahead of earnings in light of the anticipated upside from the GbE ramp, which is benefiting from higher than projected laptop contributions. Pacific Growth Equities believes the co will modestly exceed its revenue estimates reflecting 12% sequential growth driven by GbE chips, ramp of desktop storage chips and growth in Yukon chip shipments to the white-box PC market. Over the past three qtrs, MRVL has reported EPS 2 cents ahead (Q1), in line (Q4) and 1 cent ahead (Q3).
2:46PM Floor Talk : Today's market action included several mentions of the frequently overlooked VIX (Volatility Index). This volatility indicator has trended lower this month and off the March high. An institutional options trader providing color on its significance suggests that when the VIX is low (it hit a 17-month low two days ago), smart money usually starts to buy puts. The street currently expects it to go lower given the expectations of a low volatility environment going forward. However, the VIX is also considered a very inaccurate measure as it only takes the forward two months into consideration. Another contact describes it as a "chicken or the egg" indicator. With respect to individual equities, the adage "don't short a dull market" continues to ring true. Volume remains thin and traders continue to harpoon the momentum whales for upticks.
2:28PM QLogic target raised to $52 from $46 at RBC; unexpected strength in co's SCSI biz (QLGC) 48.35 +1.28:
1:21PM Silicon Labs gaining share in Asia -- CE Unterberg (SLAB) 41.95 +2.15: CE Unterberg Towbin is raising estimates and price target on Silicon Labs (SLAB) amid view that co is gaining market share in China at the expense of Skyworks (SWKS 10.93 +0.27) by virtue of customer exposure and new design wins: According to China's Ministry of Information Industry, there has been a market share shift in local handset space with Ningbo Bird now ranking #1, ahead of Motorola at #2 followed by TCL at #3 and Nokia at #4. SLAB is designed into both Ningbo Bird and TCL... Firm raising FY03 est to $0.94 from $0.91 and FY04 to $1.15 from $1.10; increases price tgt range to $43-$46 from $38-$44.
10:10AM CY: Q3 revenue looks on track -- SG Cowen 16.85 +0.81: Based on meeting with mgmt, SG Cowen is more confident that memory products are seeing strength in wireless applications. Firm believes its Q3 rev est of $210.3 mln is on track.
9:59AM Varian Semi (VSEA) 38.24 +1.25: JP Morgan upgrades Neutral to OVERWEIGHT. Believes co is poised to gain share in single wafer, high current, the "fourth" ion implant market.
9:50AM Cabot Micro (CCMP) 66.13 -0.40: UBS downgrades Buy to NEUTRAL. Target $70 to $70. Firm sees the risk / reward more balanced at the current valuation.
OmniVision (OVTI) 41.00 -0.02: reiterated Buy at Needham... Firm also raised its FY04 est to $0.96 from $0.90.
Credence (CMOS) 10.64 +0.44: Maintained Hold with $7 target at Deutsche Bank... Deutsche Bank says the wait is not over at CMOS. Firm says the co's EPS guidance is still light with operating expenses higher than expected. Firm is waiting for new products to ramp. Orders were guided up 10%, but firm sees no strong catalyst to influence its position.
European Semis and Semi Equipment upgraded by Lehman : Lehman Brothers upgraded its sector view on European Semiconductors and Equipment to Positive from Neutral based on the coincidence of favorable trends on both the supply and demand side. Individually, firm is upgrading ASML Holding (ASML) to Overweight from Equal Weight. Firm raised price tgt to EUR 18.0 from EUR 10.0.
Lam Research (LRCX) 24.79 +0.79: JP Morgan upgraded to Overweight from Neutral. According to the firm, co offers outstanding leverage as the net margin peak in the current cycle is likely to surpass the last by 400 basis points (16% versus 12%). Also, based on their models, the firm forecasts Lam to drive 44.7% of incremental revenues over the next three quarters to net income versus 38.6% for KLA-Tencor, 30% for Applied Materials, and 27% for Novellus.
Varian Semi (VSEA) 39.66 +2.67: JP Morgan upgraded to Overweight from Neutral as the co is poised to gain share in single wafer, high current, the "fourth" ion implant market. According to the firm, in the move to 90nm and 300mm, it is clear that many chipmakers now plan to switch from batch high current ion implanters to single wafer for better throughput, dose control, and uniformity. Also, primary research that suggests competitors Axcelis (ACLS) and Applied Materials (AMAT) are behind the curve in developing and commercializing the single wafer, high current systems. On valuation side VSEA shares are trading at 12.3x firm's new peak C2005 EPS estimate of $3.05 versus its group average of 15.0x.
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