From Briefing.com: General Commentary - Optimism on Wall Street is as perennial as grass. The problem arises when Wall Street starts smoking the grass. Optimism turns into absolute certainty and one- and two-year growth forecasts become perpetuities. The cloud that envelops investors form a haze around sustainable growth, margins and valuation.
Over the past year, investors have bid tech shares high in anticipation of robust growth, to the point that company valuations frequently imply that management must achieve revenue growth and margins expansion that far exceed what is sustainable beyond the 1-3 year horizon.
It is against this backdrop that investors, brimming with optimism that the Black Friday start to the holiday shopping season would bring good tidings of ever more robust demand for consumer electronics, greeted the week on Monday and bid tech stocks 1.1% higher. By Thursday, despite Qualcomm's (QCOM 49.48 +0.38) positive outlook on the wireless market, investors had retreated to the sidelines and tech shares had given up Monday's gains and then some as it became apparent same-store sales would come in around consensus. By Friday, the trickle of investors flowing out of tech became a steady stream and tech stocks closed the session 1.1% lower. Decliners outnumbered gainers 2.4:1 with decliners dropping 2.7% and advancers rising 2.5%.
Positive revisions to revenue and earnings forecasts from, among other firms, National Semiconductor (NSM 41.14 -0.66), Qualcomm and Intel (INTC 32.10 -1.44) did nothing to stem the flow as investors continue to awaken to the fact that valuations exceed the sustainable revenue growth and margins expansion assumptions priced into many tech names. This bifurcation among investors, and tech shares, between the optimist and the realist, the richly valued and the less richly valued will persist for some time and pressure shares. Near-term, protect your gains as opportunities arise. Long-term, we remain modestly bullish on tech given strong economic fundamentals, broadening global recovery/expansion and accommodative Fed policy (for added perspective, please visit the Looking Ahead page). Keep an eye on companies with sustainable competitive advantages that are well positioned to capitalize on secular trends and/or are attractively valued, including: Analog Devices (ADI 47.16 -1.39), Hewlett-Packard (HPQ 22.11 -0.49), IBM (IBM 90.64 -0.78), Intel, Microsoft (MSFT 25.98 -0.22), Sandisk (SNDK 64.35 -4.06), Tech Data (TECD 36.55 -0.15), Texas Instruments (TXN 28.36 -0.78), UT Starcom (UTSI 37.16 +0.21) and Yahoo! (YHOO 42.85 -0.28).
Next week, listen in on Microchip Technology's (MCHP 32.44 -2.06) annual shareholders' meeting and Texas Instruments' Q4 mid-quarter financial update on Monday, Cisco Systems', Hewlett-Packard's, BEA Systems' (BEAS 11.59 -0.22) and NetScreen Technologies' (NSCN 24.57 -0.79) analyst meetings on Tuesday, TriQuint Semiconductor's (TQNT 7.34 -0.46) Q4 mid-quarter financial update and Unisys' (UIS 16.36 -0.11) analyst meeting on Wednesday, and Ciena's (CIEN 6.93 -0.11) Q4 results on Thursday. For details, visit the Events Calendar and Earnings Calendar.--Ping Yu, Briefing.com
Performance by Group
Group % Change % Change Advancers % Change Decliners Ratio Advancers to Decliners
All Technology (based on a composite of over 1000 tech companies) -1.1% 2.5% -2.7% 0.4:1
Audio & Video Equipment -1.0% 0.6% -1.8% 0.3:1
Communications Equipment -0.9% 3.7% -2.6% 0.3:1
Communications Services -0.4% 1.4% -2.0% 0.8:1
Computer Services -0.9% 3.0% -2.6% 0.4:1
Computer Sys & Peripherals -1.2% 2.6% -2.7% 0.4:1
Electronic Instruments & Controls -0.6% 2.5% -2.5% 0.6:1
Scientific & Technical Instruments -1.6% 1.9% -3.1% 0.3:1
Semiconductors -2.1% 3.3% -3.2% 0.2:1
Software & Programming -1.3% 2.4% -2.9% 0.4:1
6:16PM Monday After Hours prices levels vs. 4 pm ET: The late afternoon rally has carried over into the extended session, where an upside Q4 (Dec) preannouncement from Texas Instruments (TXN 28.69 +0.45) has supported the positive tone of trading. Presently, the S&P futures, at 1070, are 1 point above fair value, and the Nasdaq 100 futures, at 1419, are also 1 point above fair value.
During its scheduled mid-quarter business update, Texas Instruments raised its Q4 EPS and revenue targets from the guidance it issued in its Q3 (Sept) report - which was above the Reuters Research consensus estimates of the time. Management now believes that EPS will be $0.18-0.20 (from $0.14-0.19 earlier and versus the consensus of $0.17) and revenues will be $2.64-2.77 bln (from $2.49-2.70 bln earlier and versus the consensus of $2.62 bln). Chip equipment makers such as AMAT and KLAC have also received a decent boost from Texas Instruments's encouraging earnings news.
Akamai Technologies (AKAM 10.32 -0.66) also raised its Q4 (Dec) outlook; however, the reaction from investors has been to sell on the news. Traders have locked profits following the stock's 450% run this year. Nonetheless, the distributor of computing platform software said that Q4 revenues should increase 20% over last year's result, and come in at $43.0-45.0 mln. As a result of the upside, FY03 (Dec) revenues should be $159.0-161.0 mln versus the $156 mln the consensus was forecasting.
REMEC (00C0 10.25 -0.81) stock has also lost ground in tonight's session as a result of an earnings announcement. The designer and manufacturer of high-frequency subsystems reported Q3 (Oct) operating income of $2.2 mln, which equates to an approximate net loss of $0.04 per share that may or may not be comparable the consensus that called for a net loss of $0.02 per share. Revenues rose 75% to $104.1 mln versus the $96.1 mln consensus. Management also noted 'despite continued industry pricing pressures, we believe we are on track to achieve profitability in the near term.'
Moving out of the technology space, homebuilder Hovnanian (HOV 96.42 -0.19) turned in a Q4 (Oct) report that was indicative of continued strength in the housing sector. The company blew past Wall Street's consensus EPS projection by $0.15, with earnings that surged 68% per share to $2.79. Revenues jumped 26% to $1.05 bln thanks to a 27% increase in the sales value of home contracts. Hovnanian also raised its FY04 (Oct) EPS outlook to $9.00 on revenues of $3.9 bln, both of which were above the Reuters Research estimates. Competitors of HOV include the likes of CTX, DHI, KBH, LEN, PHM, and TOL.
Finally, tomorrow's market will pay special attention to the FOMC's meeting. The policy announcement is not expected until 14:15 ET, and although economists do not anticipate a change in short-term interest rates or policy direction, they will be looking for how the Fed incorporates an acceleration in economic growth into its policy outlook. Briefing.com's Economic Insight column addresses various expectations for the meeting.
For complete coverage on these, and other developments, be sure to visit Briefing.com's Stock Market Update and Daily Sector Wrap pages. -- Heather Smith, Briefing.com
2:55PM CCMP Chatter 49.71 -2.51: -- Update -- Hearing that weakness in the stock is due to speculation that Cabot Micro (CCMP) has lost qualification with several 90nm copper customers. Speaking to an analyst at Berean Capital who suggests that it is very unlikely that this rumor could be true, given that company has the best technology in the industry.
1:42PM Sector Watch: Semiconductor; SOX bounces off Nov low : -- Technical -- The sector has been one of the weakest performers over the last week with the index (SOX 498 -0.1%) dropping as much as 7.8% from the Dec high to today's low. However, the SOX has tested and held at its Nov low of 494.73 in today's trade (session low 494.81). Given the extent of the recent slide and the fact that support has held builds case for a short term bounce but sustained action back above 504/506 and 510 (20 day exp avg) is needed to improve the recent pattern. Failure opens the door back to the key 50 day averages as well as the Aug/Sep trendline in the 492/489 area. Sustained penetration of this area would have negative intermediate-term implications. The Semi HOLDRs (SMH) has thus far held near its 50 day exp avg of 40.80 (session low 40.77).
11:29AM Recent Insider Sales : Disclosed in an SEC filings that Officer and Director of Silicon Labs (SLAB) sells 24,000 shares at $43.65 per share; Director of Home Depot (HD) sells 358,000 shares at $34.36 per share.
SanDisk (SNDK) 66.34 +1.99 : Company reaffirmed guidance for Y03 (Dec), reiterating guidance projection made on Oct 15, when it said revenues will "exceed $1.0 billion", Reuters Research consensus is $1.01 bln. SNDK says Thanksgiving promotions went well, sees "high bookings for our products, and the pricing environment remains benign. Retail promotions in the US over the Thanksgiving weekend were very well received and associated sell-through exceeded our expectations."
finance.yahoo.com |
