From Briefing.com Semiconductor Related: Buy dips in Semis, profit leverage underestimated -- Wedbush Morgan According to Wedbush Morgan, macroeconomic and industry fundamentals suggest a cyclical recovery lasting into 2005 and that profit leverage is underestimated. Firm also believes that management caution in capital spending creates a potential capacity shortage by mid 2004, leading to the next boom in profitability. From a valuation perspective, believes that street EPS estimates are simply too low for 2004, rather that valuations being too high. Firm suggests that investors overweight the sector and buy short-term dips. Firm's current favorites among the various segments are: INTC, MXIM, XLNX, MRVL, and TXN.
9:08AM UBS starts ADI, LLTC, and MXIM with Buy ratings : UBS initiates coverage of ADI with a Buy rating and $50 target; firm believes that the co will have the ability to improve margins over the next several quarters, enabling earnings growth of roughly 50% on rev growth of roughly 20%. Firm initiates coverage of LLTC with a Buy rating and $52 target, saying they expect the co to show the fastest rev growth of the high performance analog group. And firm initiates coverage of MXIM with a Buy rating and $51 target, saying they expect the co to continue to drive growth with a wide range of new products.
8:43AM TriQuint Semi upped to Buy from Neutral at DA Davidson, target goes to $7.50 from $6 (TQNT) 5.68: -- Update -- D.A. Davidson is raising its estimates and is upgrading its rating from Neutral to Buy. Its target price goes from $6 to $7.50. Firm says strong order patterns have set the stage for continued revenue growth in Q4. The company has booked 70% of its current guidance, with 40%-50% being more typical at this point in time. The firm is encouraged by forecasts of sustained handset demand beyond Q3, capacity utilization improvements, and the future payoff potential of the resized optoelectronics business.
7:53AM TriQuint Semi upped to Equal Weight and target raised to $8 (TQNT) 5.68: ThinkEquity is raising its price target to $8 and upgrading its rating from Underweight to Equal Weight after co upped guidance on its mid-qtr call last night. ThinkEquity is encouraged by the recent strength in TQNT's business. TQNT is seeing greater strength today than the co has seen in some time, with visibility improving. While firm believes much of this has to do with increasing strength in the wireless sector overall, they believe that TQNT will have an opportunity to perform well in the short-term.
7:49AM Intersil and IBM Microelectronics enter foundry services pact (ISIL) 27.10: Co and IBM Microelectronics announce multi-year foundry services agreement. The companies plan to install Intersil semiconductor process technology in IBM's Burlington, Vt., chip manufacturing facility. IBM will serve as a second source manufacturer for Intersil's Endura power management integrated circuits.
11:43AM Ratings Briefing - IBM : It's rare that analysts go head-to-head in their research notes, but this morning, Smith Barney analyst Richard Gardner takes CSFB analyst Kevin McCarthy to task in his bullish call on IBM (IBM 87.30 -0.54) on Monday. McCarthy upgraded shares to Outperform from In-line, saying the company was an 'ideal late-cycle tech spending recovery play due to the complexion of its installed base.' He also cited his belief that tech spending is about to experience a meaningful recovery, and used the combination of both reasons to raise his FY04 (Dec) EPS estimate to $5.10 (consensus of $4.89) from $4.80 and stock price target to $102 from $87.
Today, Richard Gardner has fired off a strong response to McCarthy's upbeat claims, stating that Smith Barney 'disagrees with the assertion that IBM is the ideal late-cycle play.' Gardner notes that most of the company's hardware revenue comes from legacy platforms (mainframe, AS400, proprietary UNIX) which should benefit less than Windows and Linux as new application deployment becomes a more important driver. He also questions the Street's expectation of 9% growth in FY04 services revenue following a year in which bookings are expected to be down. Given a lack of sales drivers, Gardner advises investors to take profits and downgrades IBM to Underperform from In-Line. He also maintains his $85 price target and FY04 EPS estimate of $4.79.
While analysts have assumed more aggressive stock opinions in the wake of the tech bubble's bust, nothing has paved the way for a showdown of this magnitude. Smith Barney and CSFB's debate over IBM's intermediate-term prospects essentially boils down to the same question that has been plaguing the tech sector since 2001 - whether IT spending is on the cusp of a substantial recovery, or is still chugging along at sub-par rates. While Briefing.com would agree that end market demand should pick up on the heels of a strengthening economy, we would also contend that the market has priced in a good deal of this turnaround. Sentiment has, in some instances, outrun fundamentals.
Consequently, we expect Smith Barney's reiteration of the same concern to act as another restraint to IBM's upside movement. Shares have been stuck within $80-90 for the better part of the last ten months, with the upper end of the range representing a key area of resistance since April 2002. As the market is entering what looks to be a consolidative stage, we would not be surprised to see Big Blue's stock range-bound over the near-term. During its Q3 (Sept) conference call, IBM will need to show evidence of a significant increase in services' bookings - that will carry over into FY04 - in order to boost the stock's prospects of holding above the $90 mark. -- Heather Smith, Briefing.com
10:41AM Ahead of the Curve: Microsoft (MSFT) 27.79 +0.24 What motivates the creators of viruses? Most people view the viruses as simply technological graffiti, written by immature adolescents. While there are certainly virus-creators that fit this profile, a deeper protest is the source of many viruses, and the reason is generally not spoken in public. Many viruses are protests against the imposition of industry standards by Microsoft.
Nearly every major virus exploits a weakness or security hole in a Microsoft product. There are virtually no viruses that infect Linux operating system weaknesses or non-Microsoft application products. The attack is against Microsoft in particular. Generally, the motivation, in our opinion, is that programmers resist the continual and growing attempts on the part of Microsoft to force programmers to use 100% Microsoft technology and programming philosophies when building systems. This imposition is a technical, not financial, exploitation of the monopolistic position, and is resented on the part of some programmers.
These resentful programmers view Microsoft much like an evil empire as depicted in Star Wars and they view themselves as Luke Skywalkers who find the hidden "entrance" into the death star. If you remember the first Star Wars movie, the death star is destroyed by careful examination of the plans, after which a "security" hole is found. A missile is launched with precise determination into a ventilation shaft, which heads into the nuclear core of the battle ship and destroys it. The viruses are these programmers deluded metaphors for that missile.
The irony, of course, is that the damage is done primarily to customers of Microsoft, and not the company itself. The attempt is to smear the reputation of Microsoft products, but since few in the media really understand this purpose, the message is not carried by the media. With this explanation, we are not trying to condone or justify the viruses in any way - they are as disruptive to us as to anyone. We think generation and propagation of a virus should be criminally prosecuted, if the creators can be caught.
Do viruses create a cause of concern on the part of Microsoft investors? Is it a threat to the Microsoft business model? Despite the tremendous amount of wasted time that viruses cause, we do not think it has a material affect on Microsoft business. From that perspective, viruses directed against Microsoft products are not in the same category as Tylenol-tampering, for example. Nevertheless, it would be better for everyone if viruses, particularly email based viruses, could be eradicated, but the prospect seems unlikely for the time being. After all, as we all know, it is pretty hard to eradicate rebels who believe themselves totally justified. - Robert V. Green, Briefing.com
9:23AM The Technical Take : The recent mild negatives noted before the open yesterday hinted at a minor slowing of momentum and some limited selling pressure in the form of few distribution days (declines on higher volume) but no strong indications that the big money institutional investors were stepping away from the table. While Wednesday did develop into a clear win for the bears in terms of the overall performance as the market and sector indices posted sizeable broad based losses, volume declined at the Nasdaq where the most out-sized losses were seen (semi -5.2%, networking -5.1%).
Obviously we don't ignore the negative price action just because it came amid lower volume at the Nasdaq (NYSE volume was higher) especially taken in conjunction with the other concerns (low volatility, seasonals, top heavy technicals). However, the market was due for a period of consolidation in the wake of the recent daily/weekly winning streak.
Nasdaq Composite: The tech dominated index ended below its short term trend indicating 20 period exp mov avg on Tuesday and as we indicated, without a reversal back above, it was vulnerable to further downside forays. Yesterday's action saw it push below its 50 period simple mov avg for the first time sine Aug 26 and close below this avg for the first time since it confirmed the upside reversal on Aug 12. As the chart below shows we now have seen the inverse of that develop.
OT: You took something completely out of context in my post. You belittled my opinion which was simply that it may be possible that we could yet see a bear market bottom. Sure I suggested that it is possible that we may yet see valuations so low that most here will not believe it but I also said I was looking to go long on this dip.
Your apology is accepted but I won't forget what you wrote. I realize that I could be wrong about the possibility that the market could fall further. That's why I want to buy the dip.
RtS |
