From Briefing.com: General Commentary
The selling activity on Tuesday carried over to Wednesday and then some with the technology sector leading a broad-based market decline. Frankly, it doesn't matter how one looks at the market - whether it be from a fundamental, technical, or psychological standpoint - there was a little something for everyone, as far as explanations go, for the sell-off.
There was talk of disappointment that Texas Instruments (TXN 23.42 -1.90) and Xilinx (XLNX 30.29 -1.81), both of which have gone up sharply in recent weeks, didn't raise the bar enough in terms of sales and earnings expectations when delivering their mid-quarter updates. Their failure to do so provoked valuation concerns.
In turn, there were concerns over the airing of what is alleged to be a new videotape of Osama bin Laden spewing his - shall we say - fecal thoughts. In any event, the release of the tape was an unsettling coincidence seeing how Thursday marks the two-year anniversary of the 9/11 tragedy.
Finally, there were some technical developments that didn't sit well with traders. In particular, the S&P 500 broke below 1015 (3-month range-top taken out on Sept. 2); meanwhile, the Nasdaq dropped below its 20 period exponential moving average at 1873 and kept on sliding. At the close, the Nasdaq stood at 1823.81 and was in close proximity to a more important support in the 1812 area, which marks the initial recovery high in August and the 20-day exponential moving average.
Because there was something for everyone, the market was unable to gather any upside momentum. In fact, the loss of momentum exacerbated the selling activity as it stirred concerns that the inevitable correction of the tech sector's overbought condition was at hand. Fittingly, semiconductor stocks, which have been the hottest performers, led the tech pullback. On Thursday, another gauge of sentiment will be available when we see how the sector, and the software stocks in particular, responds to the better than expected earnings report from Adobe Systems (ADBE 36.39 -1.64) that was replete with upward guidance.
Then again, it may not be fair to cast judgment on any response for it will certainly be understandable if the market's thoughts lie elsewhere on Thursday, September 11. In that vein, one minute moments of silence will be observed at the NYSE at 8:46 a.m., 9:03 a.m., 9:59 a.m., and 10:29 a.m. (all Eastern Standard time) to commemorate those who lost their life in the senseless act of terror.-- Patrick J. O'Hare, Briefing.com
5:58PM Wednesday After Hours price levels vs. 4 pm ET levels: The indices have rebounded some from their plunge in the regular session as the S&P futures, at 1013, are 2 points above fair value and the Nasdaq 100 futures, at 1334, are 1 point above fair value. Encouraging earnings pronouncements from the likes of Adobe Systems (ADBE 38.30 +1.91) and Triquint Semiconductor (TQNT 6.16 +0.48) have stemmed the selling pressure.
To begin, Adobe reported Q3 (Aug) financial results that exceeded the company's prior revenue and EPS target ranges. Revenues rose 12% from year-ago levels to $319.1 mln while EPS increased 28% to $0.28. Management said that "our exceptional Q3 performance was driven by year-over-year growth of 62% in our ePaper business." The company remains optimistic about the growth opportunities across its overall business, and said that Q4 (Nov) gross margins should be approximately 93%, EPS should be $0.30-0.32, and revenues should be $330-350 mln. The Reuters Research consensus estimates for the latter two metrics were $0.28 and $332.1 mln, respectively.
Shares of Triquint Semiconductor have also caught a considerable bid following the company's move to raise its Q3 (Sept) outlook. The small-cap semiconductor company now sees revenues of $75-77 mln (consensus of $74.8 mln), a net loss per share of between $0.06 and $0.08 (consensus of a loss of $0.07), and a gross margin of 25-28%. It credited its higher forecasts to "end market demand ... that has been robust."
Elsewhere, Dow component Johnson & Johnson (00C 52.10 +0.06) has tacked on more gains to the ones it accumulated in the regular session with its news that results from its latest clinical trial in Canada and Europe showed its Cypher treatment working better than it did in the US. The drug-eluting stent showed that reclogging occurred in only 5.1% of patients 8 months after being treated compared with 8.9% in its US trial.
At the same time, Johnson & Johnson's closest rival in the drug-eluting stent race, Boston Scientific (BSX 57.06 -0.94), announced that it has entered into a series of agreements with CryoVascular Systems Inc, a privately held company. CryoVascular Systems has developed a proprietary technology known as the PolarCath(TM) Peripheral Dilatation System, which utilizes liquid nitrous oxide to provide precise freezing of the diseased artery during balloon angioplasty. Boston Scientific expects to launch the device in the US during Q4 (Dec) through its existing sales organization.
Finally, teen retailer Quicksilver (ZQK 17.91 +0.87) has also joined the list of winners in the extended session with its better than expected Q3 (July) report. The company delivered a EPS increase of 17% to $0.21 and a revenue increase of 44% to $251.5 mln as compared to the consensus expectation of $0.19 and $221.6 mln, respectively. Management also noted that the initial feedback on next year's product has been good.
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
1:57PM National City (NCC) 30.53 -1.28: Slowly but surely, the market
4:50PM Ingram Micro warns for Q3 (IM) 14.19 -0.44: Co. expects Q3 (Sep) sales to range from $5.175-5.350 bln, R.R. consensus is $5.278 bln and Q3 (Sep) EPS in the range of $0.05-0.08, excluding special items, R.R. consensus is $0.16.
4:19PM Adobe Systems beats by $0.03, ex items, guides higher (ADBE) 36.39 -1.64: Reports Q3 (Aug) pro forma earnings of $0.28 per share, excluding a $0.01 charge, $0.03 better than the Reuters Research consensus of $0.25; revenues rose 12.0% year/year to $319.1 mln vs the $311.7 mln consensus. Company sees Q4 EPS of $0.30-0.32 vs consensus of $0.28revenues of $330-350 mln, consensus $332 mln.
4:06PM TriQuint Semi raises guidance (TQNT) 5.67 -0.46: Co raises Q3 rev/EPS guidance to $75-$77 mln/($0.06)-($0.08), vs previous guidance of $70-$74 mln/($0.08)-($0.11) given on July 24. Co also says Q4 rev will be at the high end of the range of $72-$76 mln.
3:23PM Adobe Systems -- Earnings Preview (ADBE) 36.37 -1.66: Adobe Systems is scheduled to report tonight after the close, with consensus standing at $0.25 in EPS and $311.7 mln in sales. Thomas Weisel expects the co to report an in-line to slightly stronger than expected Q3, as the co reaffirmed guidance on July 31 and firm believes the co had good rev visibility heading into the second half of the qtr. Piper Jaffray expects "a solid qtr" and believes that the co originally provided conservative guidance for Q3, as both NPD data and industry trends have indicated that the environment and ADBE's business have been stable over the last several months; in addition, firm would be buyers of ADBE regardless of whether the new Photoshop 8.0 ships in Q4 (as firm expects), since Street numbers would likely need to be revised upwards if it does, and buyers would likely support the stock if it's delayed to Q1 in anticipation of the upcoming upgrade cycle.
11:54AM Kulicke & Soffa defended by Morgan Stanley (KLIC) 11.55 -1.35: Morgan Stanley believes that downside is limited for KLIC and the shares would be attractive on weakness; although the co's mid-qtr guidance seemed disappointing (co reiterated guidance for flat sequential revs vs their expectation that guidance would be raised to +5%), firm believes demand is indeed picking up, but some of the deliveries are sliding into Oct from Sept as the co rushes to build manufacturing capacity; also, the shares are trading at 1.2x trailing sales, which is significantly lower than the group avg of 4.5x sales, and firm thinks downside is limited to around 1.0x trailing sales.
9:39AM TSMC and UMC conservative about Q4 sales -- Digitimes : Digitimes article reports Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) have conservative outlooks about their fourth-quarter sales, according to its sources. In addition, Digitimes sources at both foundries stated both companies have cited concerns over its clients being too optimistic about the market with the result of their advanced processes potentially being overbooked. As most integrated device manufacturers or IDMs are not running at full utilization on their own advanced processes, potential orders from IDMs in the fourth quarter are limited, according to Digitimes sources.
Micron (MU) 13.35 -1.35: Soundview downgraded to Neutral from Outperform and cut its target to $16 from $21; firm says DRAM data points in Asia are quite mixed, which is a disturbing dynamic mid-way through Sept given that back-to-school data points are solid; also, stable DRAM pricing is not good enough for MU shares to outperform, and the risk of both contract and spot price weakness is a real scenario in the coming 4-8 weeks.
Power Integrations (POWI) 34.75 -1.85: AG Edwards downgraded to Hold from Buy based on valuation; shares trade at 48x and 37x its respective FY04 and FY05 EPS ests, vs the 5-year median of 38x.
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