From Briefing.com: The Nasdaq had a lousy week last week, but if the bias seen Monday persists, it will soon be forgotten. That's because the Nasdaq showed some characteristic resolve in bouncing back from an early attempt to carry on with last week's selling efforts. In doing so, it sparked a steady wave of buying interest for the remainder of the session that culminated in a gain of nearly 2.0% for the Nasdaq, which drew support from some bullish analyst commentary and some end-of-quarter posturing.
J.P. Morgan set the tone for the day with a striking call suggesting it felt the chip equipment stocks were more oversold now than at any other point since March and that the stocks are at a trough now given their traditional period of outperformance from October to May. Briefing.com thinks the run the stocks have had in the past year has more than accounted for the expected pick-up in business and would refrain from chasing the stocks until the companies provide commentary on shipping/bookings trends in the Q3 reporting period that begins in earnest in a little over two weeks.
Our cautious view aside, the chip equipment stocks spearheaded the tech rally on Monday along with the chip stocks, which got an added boost from the Semiconductor Industry Association's report that indicated chip sales were up 4.0% in August, marking the sixth consecutive monthly increase.
More often than not, when the semiconductor stocks do well, the tech sector and the Nasdaq follow suit - and Monday's session was no exception. The one exception to be noted, though, was that there wasn't a great deal of conviction behind the buying efforts as volume at the Nasdaq was just 1.68 bln shares. That is lower than any of the down days witnessed last week. So, take from Monday's session what you will, but don't walk away thinking it was a powerful rally. It was a rally no doubt, but it lacked the muscle necessary to convince us that the sector's consolidation phase has run its course.-- Patrick J. O'Hare, Briefing.com
6:07PM Monday After Hours price levels vs. 4pm ET: Today's bounce from last week's sizable pullback has stalled in the after hours session, where the S&P futures, at 1004, are 1 point below fair value, and the Nasdaq 100 futures, at 1335, are 3 points below fair value. A light corporate news flow has not provided many catalysts for further buying interest.
The largest story of the evening is undoubtedly Wal-Mart's (WMT 57.19 -0.04) decision to reaffirm its Q3 (Oct) guidance. The world's largest mass merchandiser said it continues to see EPS of $0.45-0.47, adding that earnings are tracking in the middle of that range. The Reuters Research consensus estimate is pegged at $0.47. Wal-Mart also said that it plans to continue its aggressive unit growth in FY04 (Feb) by adding 50 to 55 new discount stores and 220 to 230 new Supercenters domestically, and 130 to 140 units in existing markets internationally.
Among the most active stocks in the extended session is Sun Microsystems (SUNW 3.47 -0.39). The computer giant announced that it will recognize a $1.05 bln non-cash charge in 4Q03 (June) to increase a valuation allowance for its net deferred tax assets, and said it sees a revised net loss per share of $0.32 as a result. The company also added that it anticipates a Q1 (Sept) GAAP loss per share of approximately $0.07-0.10, including a tax provision of approximately $0.01 per share, which reflects a particularly difficult quarter for the company due in part to intense market and competitive dynamics. The Reuters Research consensus estimate, which is given on a pro-forma basis, is not comparable to the company's outlook.
Another loser in the after hours is Regeneration Tech (00C0 11.70 -1.82). The stock has tumbled 13% following the processor of human bone and cartilage's move to cut its Q3 (Aug) sales outlook. Management said that it expected to generate approximately $20 mln in revenues, down from its previous guidance of $22-24 mln and the Reuters Research estimate of $24.5 mln. The shortfall is primarily due to lower orders for the company's spinal implants than were previously expected. Due to the uncertainty, Regeneration Tech is also withdrawing its FY03 (Dec) guidance of revenues of $88-92 million and net income of $0.25-0.27 per share.
Network Associates (NET 13.77 -0.11) is also making the news wires following the security provider's announcement that it has agreed to pay the plaintiffs of class action lawsuit $70 mln. The company also announced it expects to file its restated financial resutls with the SEC by October 31, 2003, which will extend the time for filing its 2002 Form 10-K, and Q1 and Q2 2003 Form 10-Qs. Management announced in March that it would restate its 1998, 1999 and 2000 financial statements to reflect revenue on sales to distributors on a sell-through basis, which is how the company has reported sales to distributors since January of 2001.
Finally, Enterasys (ETS 5.66 -0.04) is the latest company to report a financial impact from Hurricane Isabel. The networking solution provider said it expects Q3 (Sept) revenue to be down 8-13% as compared to revenue of $108.4 million in Q2 due to delays in purchasing decisions in the Mid-Atlantic. The figure comes to approximately $94.31-99.73 mln versus the consensus expectation of $110.6 mln. Competitors of ETS includes the likes of ALA, CSCO, EXTR, FDRY, HPQ, NT, and COMS.
For more detail on these, and other developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages. -- Heather Smith, Briefing.com
ESS Tech (ESST) 11.22 +0.53: CE Unterberg raised its near term rating on ESST to Buy with a $13-$14 price target. Firm says Vibratto II and Vibratto-S ramp will improve ASPs in a DVD player and the co's entry into the camera market should provide upside to 2004 estimates. Firm's price target is based on applying 1.5x to its CY04 sales estimates of $250 mln and adding back $3.92 in cash. Longer term, firm would like co to use its VCD and DVD position as a cash cow and develop products for other high volume end markets such as Digital TV.
NVIDIA (NVDA) 15.95 -0.91: Merrill Lynch downgraded to Sell from Neutral and cut FY04-05 ests well below consensus, saying it sees no signs that the co's mobile computing and chipset businesses are about to improve; also, firm believes that NVDA may begin losing share in its key discrete desktop graphics processor mkt, as just-completed checks in Taiwan suggest that competitor ATYT could begin gaining on NVDA in Q4 of this year; firm also thinks the stock is expensive for a PC graphics co, although it's not expensive relative to its sector.
PMC-Sierra (PMCS) 13.58 +0.70: Co announced that seven of its Metro IC products have been selected by Lucent Technologies for its Metropolis DMX system. The Metropolis DMX system provides seamless end-to-end optical integration and interworking capabilities to add data services onto SONET/SDH networks.
Silicon Storage (SSTI) 9.11 +0.80: licensed its SuperFlash technology to Toshiba... The agreement allows Toshiba to develop microcontrollers embedding SST's ESF1-500 (0.5 micron) SuperFlash technology and to reinforce its line-up of flash-embedded microcontrollers targeting a wide range of applications. In return, SST will receive licensing fees and royalties from Toshiba on sales of microcontrollers that incorporate the SuperFlash technology.
Semi Equipment stocks most oversold since early March - JP Morgan : JP Morgan believes that Semi Equipment stocks are more oversold now than at any point since early March and think concerns about Q4 order growth are overblown; firm thinks that a solid earnings season, an improving bookings outlook as Q4 unfolds, and traditional Oct to May stock seasonality suggests now is a trough. Firm reiterates ASML and KLAC as its top large-cap picks, and says BRKS, CYMI, VSEA, and LRCX remain its top small-cap picks. |
