From Briefing.com: Tech stocks, for the second day, tracked the broad market higher at the open and then led shares lower. Shares were initially lifted by favorable economic data. First the November CPI came in at -0.2 with Core CPI down 0.1%, easing concerns over inflation. Second, November Industrial Production rose a stronger than expected 0.9%, with capacity utilization coming in at 75.7%, suggesting manufacturing is strong but not strong enough to drive prices higher. Finally, November Housing Starts rose 4.5% Y/Y while Building Permits dropped 5.4%, suggesting construction remains relatively strong and we are unlikely to see higher materials prices near-term.
Despite the positive economic data, tech shares sold off as investors continued to reassess risk/reward for tech. While the broad markets ended Tuesday's trading higher, the Philadelphia Semiconductor Index (SOXX 479.96 -2.33) eased 0.5%. Decliners outnumbered advancers 1.6:1 with decliners dropping 1.5% and advancers adding 1.2%. The Briefing.com Tech Index gave up 0.6%. Decliners exceeded advancers 1.3:1 with decliners falling 2.9% and advancers gaining 2.3%.
As we have noted on the General Commentary page, there is a bifurcation taking place among tech, between the richly valued and the less richly valued names. The trading action over the past few sessions confirms this idea of a rotation from higher multiple to lower multiple names (based on price/sales-to-growth multiples and the magnitude of the percent change for advancers vs. decliners). We think economic data will continue to support a modest upward bias in the equity markets but, because of higher valuations, the pressure on tech is likely to persist for some time. Near-term, we would continue to protect gains as opportunities arise (sell into strength). Long-term, we remain modestly bullish on tech given strong economic fundamentals, broadening global recovery/expansion, favorable secular trends and accommodative Fed policy. Visit the Story Stock page for the latest thinking on secular trends driving opportunities within tech.--Ping Yu, Briefing.com
Group % Change Avg % Change Advancers Avg % Change Decliners Ratio Advancers to Decliners *P/SG Ratio: Advancers *P/SG Ratio: Decliners
Philadelphia Semiconductor Index -0.5% 1.2% -1.5% 0.6:1 4.4 4.1
Briefing.com Tech Index(based on a composite of over 1000 tech companies) -0.6% 2.3% -2.9% 0.8:1 1.6 1.9
Audio & Video Equipment -0.1% 3.0% -2.2% 0.6:1 0.5 0.6
Communications Equipment -1.5% 2.1% -3.6% 0.6:1 1.8 2.0
Communications Services -0.2% 1.9% -2.6% 1.1:1 0.9 1.3
Computer Services -0.5% 2.3% -2.7% 0.7:1 1.6 2.2
Computer Sys & Peripherals -0.9% 2.6% -3.2% 0.6:1 1.6 1.6
Electronic Instruments & Controls -0.5% 2.2% -2.9% 0.8:1 1.2 1.6
Scientific & Technical Instruments +0.3% 3.2% -3.3% 1.3:1 1.4 1.2
Semiconductors -1.0% 2.2% -2.8% 0.5:1 2.8 3.0
Software & Programming -0.4% 2.5% -2.8% 0.8:1 1.8 1.8
*P/SG Ratio: (Price / Sales) / Sales Growth.
6:39PM Tuesday After Hours prices levels vs. 4 pm ET: A relatively quiet extended session in which few companies have released earnings, or made significant changes to their guidance. Most of tonight's headliners are small names within their spaces, and have thus had limited impact on the broader market. Presently, the S&P futures are at 1075, 2 points above fair value, and the Nasdaq 100 futures are at 1407, flat with fair value.
The following table summarizes tonight's largest point gainers/losers, and the reasons behind their moves:
After Hours Mover % Change Move Reason for Move
Applied Signal (APSG) +10% Small-cap designer of digital signal processing equip tops Reuters Research consensus Q3 (Dec) EPS estimate by $0.06 and raises its annual dividend payout to $0.50; APSG competes with defense contractors like GD, LMT, NOC, and RTN
Barr Labs (BRL) +1% US FDA advisory panel votes to recommend Plan B, a 'morning after contraceptive pill,' to be sold without a prescription; Barr is in the process of acquiring the drug from Women's Capital
California Micro Devices (00C0) +6% Small-cap analog semiconductor company raises its Q3 (Dec) EPS and revenue outlook solidly above Street estimates citing bookings that should be ahead of Q2's rate - which was the highest level in 3 years
Martek Biosciences (MATK) -3% One of the few reporters of the night, Martek meets the Q4 (Oct) consensus EPS estimate of $0.21, but falls shy of the Street's revenue forecast of $36.8 mln; Traders take profits from the stock's 140% year-to-date rally
Textron (TXT) +1% Manufacturer of engine components and industrial tools guides higher for Q4 (Dec) and FY03 - above both its previous range and the market's expectation
Tomorrow morning will be surprisingly busy in terms of quarterly earnings reports. Brokerage firms Bear Stearns (BSC) and Lehman Brothers (LEH) are scheduled to report, as are consumer electronic retailers Best Buy (BBY) and Circuit City (CC). Briefing.com will be provide updates of these releases on our Story Stocks and In-Play pages - the latter available on our Platinum product.
For complete coverage on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap pages. -- Heather Smith, Briefing.com
7:10PM Dell Computer: Michael Dell sells 10 mln shares over past several sessions (DELL) 32.65 -0.36: According to SEC filings, Michael Dell sold 10 mln shares on Dec 12-16 at prices ranging from $32.70 to $33.81. The filing also discloses a 1 mln share sale by spouse on Dec 15 at $33.16. Following the transaction, Michael Dell retains 237.89 mln shares.
2:28PM Broadband DSL has attracted an additional 25 mln subs : Broadband DSL has attracted an additional 25 mln subscribers globally in the past 12 months, reaching 55 mln at the end of September 2003. According to the latest global numbers prepared for the international DSL Forum by telecommunications analyst firm Point Topic, growth to date has exceeded projections by three million subscribers. This means by the year's end, more than 62 million homes and businesses around the world are expected to select DSL rather than other broadband technologies, extending DSL's global lead over cable modems.
Advanced Micro processor (AMD) 14.36 -0.37 : Company announced Fujitsu Siemens Computers' CELSIUS V810 high-end workstation will feature the AMD Opteron processor 200 Series. Fujitsu exec says "The architectural benefits of the AMD Opteron processor and the ability to run 32-bit and 64-bit applications in parallel will enable our customers to develop completely new products, reduce time to market and development costs."
California Micro (CAMD) 7.92 -0.03 : After the close, guided DecQ above consensus. Co sees Q3 (Dec) revenue $16.2-$17.0 mln and EPS of $ $0.06-$0.09 vs Reuters Research consensus of $15.9 mln and $0.04, respectively. Bookings are expected to be sequentially higher than the prior quarter's $15.4 mln, which was the highest level the company had achieved in three years.
LSI Logic (LSI) 8.37 -0.38 : RapidChip may not be proceeding as anticipated - BofA (LSI) 8.70 -0.05: Banc of America says their channel checks suggest a significant internal reorganization recently occurred at LSI; firm says EVP Rick Marz, formerly in charge of the co's ASIC and RapidChip efforts, has been replaced by Joe Zelayeta (formerly EVP of WW Operations), and they believe this reorganization is especially significant, as it suggests that the co's efforts at rolling out/achieving traction with its key RapidChip product family is likely not proceeding as anticipated. Maintained Sell rating and $6 target.
Soundview reiterated their Outperform and $14 target on LSI following Banc of America's negative note on the co's reorganization (9:32). Soundview views the co's mgmt changes as unambiguously positive, saying RapidChip is seeing better adoption in the mkt, which in turn required the reorganization. In addition, firm cites: 1) LSI's reorganization includes changes that parse out the Storage Systems biz to act more independently, and position RapidChip Platform ASICs for high volume production, 2) Rick Marz is now EVP of Worldwide Marketing, which is a more visible role for Marz and is likely a reward for his success, 3) Joe Zelayeta replaces Marz as EVP of ASIC Technology and Methodology, and his operational experience will be ideal for taking RapidChip to volume production, and 4) the Systems Storage biz included changes that incorporate more separation from LSI's semi biz.
Taiwan Semiconductor Manufacturing (TSM) 9.80 -0.16 : Needham initiated Taiwan Semi (TSM) with a Strong Buy and $13 target, based on a 25x p/e multiple of $0.50. Among the stocks in its universe, the firm considers the stock the most favorable way to play the trends affecting the semiconductor industry in 2004: 1) an industry-wide upturn in semiconductor demand, 2) limited availability of advanced capacity, which should drive pricing leverage, 3) increased capital efficiency driven by the shift to 300mm substrates and 4) continued growth in the trend to outsource semiconductor manufacturing. With the largest base of dedicated manufacturing capacity, an established reputation for delivering quality wafers, and the most efficient use of capital investments in the foundry industry, the firm believes the co is poised to deliver superior profitability and revenue growth in 2004. |
