From Briefing.com: Tech shares recovered from early morning weakness to lift the Nasdaq to a higher close, and to outpace the broad market. Industrials ended the session lower.
The Briefing.com Tech Index (BTI) climbed 0.80%. Advancers outnumbered decliners 1.6:1, with advancers climbing 2.7% and decliners dropping 2.0%. The Philadelphia Semiconductor Index (SOXX 509.84 +3.55) rose 0.70%. Advancers led decliners 1.3:1.
The Nasdaq Composite (IXIC 2032.57 +9.59) gained 0.47% and the S&P (SPX 1144.91 +1.24) edged higher 0.11%. This compares against the Dow (DJI 10580.14 -21.48), which slipped 0.20%.
Weaker than expected durable goods orders and a slight increase in initial jobless claims sent stocks lower at the open on Thursday but stronger than expected new home sales helped tech stocks shake off the early morning weakness.
January Durable Goods fell an unexpected 1.8% but was up 2% excluding the transportation segment. Initial jobless claims rose 6K to 350K. New home sales fell a less than expected 1.7% to an annual rate of 1.106MM vs. expectations for 1.075MM.
As we commented yesterday, mixed macro economic data coupled with strong earnings reports point to a growing economy with limited near-term inflation and interest rate risks. This is favorable for equities. Going beyond near-term concerns, stocks is one asset class that consistently outperform inflation, and tech shares have some of the best growth and margin expansion stories.
The market is aware of this and tech valuations remain high despite recent weakness. As noted in the Novellus Systems Story Stock, tech shares trade at, on average, a 20% premium to the S&P on a trailing 12-months price/sales to sales growth basis. This is a reasonable premium given the revenue growth and margin expectations for tech companies (forward multiples are lower). We remain moderately bullish on tech over the long-term in view of the favorable economic outlook and the early stage of this global recovery/expansion but stress the need for caution near-term given high valuations.
Among today's movers, Avici Systems (AVCI 21.19 +2.93) gained 16.1%, Digital Angel (DOC 3.59 +0.60) soared 20.1% after the company noted that legislation has been introduced calling on the Secretary of Agriculture to immediately establish an electronic nationwide livestock identification system, and Acacia Research-Acacia Technologies (ACTG 6.68 + 1.12) jumped 20.1% after it announced it licensed its digital media transmission technology to a unit of Walt Disney.
After the close, Autodesk (ADSK 25.97 +0.07), Chinadotcom (CHINA 11.80 +0.23), Marvell Technology (MRVL 42.88 -0.25) and McData (MCDTA 7.79 +0.16) posted results ahead of expectations and provided positive guidance.
Looking ahead to Friday: Michigan Consumer Sentiment is due at 9:45am ET and the Chicago PMI is due at 10:00am ET.--Ping Yu, Briefing.com
6:16PM Thursday After Hours prices levels vs. 4 pm ET: The extended session has mimicked the entire week's worth of lackluster trade as the S&P futures, at 1144, are 1 point below fair value and the Nasdaq 100 futures, at 1476, are 2 points below fair value. Tonight's earnings reports have been relatively upbeat, but have not inspired much buying interest in a stock market preoccupied with valuation concerns.
The below table details the most notable reports of the evening, as well as the stock's resulting move.
After Hours Mover % Change Move Reason for Move
Autodesk (ADSK) +13% Software and digital content company beats the Reuters Research consensus EPS estimate by $0.16 in its Q4 (Jan) report; Also says that Q1 (Apr) and FY05 EPS and revenues will come in well above the market's expectation; Stock had sold off 6% into the report, heightening its investment appeal now
Gap Inc (GPS) +1% Specialty retailer matches the Q4 (Jan) consensus estimate of $0.37 on revenues that rose 5%; Comparable store sales also increased 3% on top of an 8% increase last year; Looking to FY04, Gap says it anticipates further margin improvement; Briefing.com has been positive on GPS in our Story Stocks since May (up 28% now)
Kohl's Inc (00C) +2% After warning for Q4 (Jan) in early Jan, the discount retailer reports EPS of $0.72, $0.03 ahead of the revised Street forecast; On its conference call, however, Kohl's issues Q1 (Apr) and FY05 projections that are below the Reuters Research estimates; This does not prevent buyers from picking up shares as recent comps have shown improvement
Marvell (MRVL) +5% Semiconductor company shows upside in its Q4 (Jan) report, issues Q1 (Apr) and FY05 guidance that is well above consensus estimates in its conference call, and announces a 2-for-1 stock split; Competitors include AGR.A, STM, and TXN
McData (MCDTA) +9% Storage networking name tops the Street estimate by a penny on record revenues in its Q4 (Jan) report; Also says it is comfortable with the Q1 (Apr) range of estimates; Direct rival BRCD gets a slight lift from the report as well
Tomorrow, several economic reports are on the calendar that carry a good degree of significance. The revision to February Michigan Consumer Sentiment, the revision to Q4 GDP, and the February Chicago PMI Index are all scheduled to be released.
For more details on these and other developments, be sure to visit Briefing.com's Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
5:23PM Marvell Conference Call Update 42.88 -0.25: Marvell guides Q1 revs higher to increase 10% from $243.3 mln to $267.0 mln versus Reuters Research consensus for revs of $249.7 mln. For FYO5, the co is guiding revs of $1.12 bln-1.175 bln versus Reuters Research expectations for revs of $1.07 bln.
4:27PM McDATA beats by a penny; guides for Q1 (MCDTA) 7.79 +0.16: Reports Q4 (Jan) earnings of $0.03 per share, $0.01 better than the Reuters Research consensus of $0.02; revenues rose 8.0% year/year to $114.0 mln vs the $115.4 mln consensus. Co is comfortable with current First Call Q1 (Apr) estimates of EPS of $0.02 and revenue estimates in the range of $108-115 mln.
4:25PM MCDTA comfortable with Q1 range of estimates :
4:21PM Autodesk beats by $0.16; guides above consensus (ADSK) 25.97 +0.07: Reports Q4 (Jan) earnings of $0.45 per share, ex items, $0.16 better than the Reuters Research consensus of $0.29; revenues rose 51.0% year/year to $295.3 mln vs the $252.2 mln consensus. Co sees Q1 pro forma EPS of $0.16-0.21 on revs of $240-250 mln vs the Reuters Research consensus of $0.12 & $211.9 mln respectively. For Y05 pro forma EPS of $1.15-1.25 on revs of $990mln - $1.01 bln vs the consensus of $1.01 & $950.8 mln respectively.
4:18PM Virage Logic CEO adopts 10b5-1 trading plan (VIRL) 10.02 -0.20: Co announced that Adam Kablanian, Pres and CEO, has adopted a new stock trading plan under SEC Rule10b5-1. The new stock trading plan provides for sales during the term of the plan of up to 360,000 shares, subject to predetermined price and volume limits, but not more than 20,000 shares in any trading day. As of December 31, 2003, Kablanian held 3,791,161 shares of VIRL common stock.
4:10PM Marvell beats by a penny, ex items, approves 2-for-1 split (MRVL) 42.88 -0.25: Reports Q4 (Jan) pro forma earnings of $0.29 per diluted share, ex items, $0.01 better than the Reuters Research consensus of $0.28; net revenues rose 61.3% year/year to $243.3 mln vs the $240.3 mln consensus. Co's Board approved a 2 for 1 stock split of co's common stock, to be effected pursuant to the issuance of additional shares. If approved by MRVL's shareholders, co expects declaration and payment of additional shares to occur within 30 days following the Annual General Meeting.
3:33PM McDATA Earnings Preview 7.74 +0.11: McData is scheduled to report Q4 (Jan) results tonight after the close, with consensus standing at $0.02 in EPS and $115.4 mln in sales. First Albany expects $0.01 and $114 mln, and says recent comments from co's like EMC, Brocade, and NetApp suggest robust end-of-year IT spending, particularly in Dec and in networked storage; firm also expects catch-up from MCDTA's prior EMC-related shortfall, and will be listening for evidence that this key relationship is on the mend (EMC is MCDTA's biggest customer at more than 50% of revs); while Cisco remains a concern, firm thinks its recent strength largely reflected expansion in greenfield accounts (as expected), and that it did not have an immediate impact on pricing. Fulcrum expects the co to report $0.01 and $115 mln, and expects the co to address during its call the overall pricing environment (which Brocade and Cisco indicated was stable), and anticipates mgmt will discuss the adoption of IP storage products associated with the Nishan acquisition as well as progress on the co's next generation director product from Sanera Systems.
3:01PM MRVL Earnings Preview 43.29 +0.16: Marvell Technology is scheduled to report earnings tonight (Reuters consensus $0.28 and $240.31 mln. Generally speaking, analysts are looking for modest upside on both EPS and revs. The outlook for AprQ guidance is a bit more mixed. Pacific Growth expects the co to guide for 6-8% sequential revenue growth. Smith Barney looking for AprQ guidance to exceed consensus of 3% qtr/qtr, but also notes that anything short of 8-10% guidance could be perceived as a negative change in momentum. Oppenheimer believes co will guide AprQ revs up 6-8% sequentially, leaving the possibility of an up 10% quarter within reach. Oppenheimer notes that since stock has not run up significantly ahead of tonight's call, the report will be a neutral to positive event for the stock.
1:35PM CSCO color 23.78 +0.20: Following the release of this morning's Jan Durable Goods orders, Bear Stearns says that with the new strength in communications equipment order activities (data represents a large 73% sequential increase when seasonality is factored in), they think calendar Q1 results should be tracking in-line or slightly stronger than expectations; firm's checks seem to confirm this assessment, and at Cisco they believe that after a relatively weak start for this qtr, activities have picked up by late-Feb (a small exception is the optical biz due to lumpiness in orders); firm believes the co's Q3 (April) rev is tracking in-line with expectations, or a 3% sequential growth.
12:53PM SNDK: Hearing gross margin guidance issued on call is being viewed favorably 25.85 +1.74:
12:03PM SNDK says can grow 30-40% annually to achieve their tgt of being a $5 bln co in five yrs 25.36 +1.25:
Acacia Research (ACTG) 6.68 1.12 : Licensed Digital Media Transmission technology to Walt Disney.
Marvell (MRVL) 42.88 -0.25 : After the close, reported Q4 (Jan) pro forma earnings of $0.29 per diluted share, ex items, $0.01 better than the Reuters Research consensus of $0.28; net revenues rose 61.3% year/year to $243.3 mln vs the $240.3 mln consensus. Co's Board approved a 2 for 1 stock split of co's common stock, to be effected pursuant to the issuance of additional shares. If approved by MRVL's shareholders, co expects declaration and payment of additional shares to occur within 30 days following the Annual General Meeting.
National Semi (NSM) 39.70 +1.07 : Smith Barney Citigroup upgraded Hold to BUY. Believes co is benefiting from strength in analog/mixed-signal products and that there is greater leverage possible for NSM than its competitors.
Fairchild Semi (FCS) 25.45 +1.22 : Fairchild Semiconductor (FCS 25.45 +1.22): Thomas Weisel upgraded Fairchild Semi and International Rectifier (IRF 45.88 +1.60) to Outperform from Peer Perform based on checks with almost 50 distributors, OEMs, and sales reps across Asia, Europe, and North America within the last several days which indicated that business conditions for discretes/low-end analog continue to improve; firm also noted the co's significant operating leverage. Target for FCS is $35, target for IRF is $60.
Genaera (GENR 4.61 +0.31): WR Hambrecht initiated coverage of Genaera with a Buy and 12-mo price target of $9. The firm said Genaera possesses a diverse and still undervalued pipeline of proprietary drug candidates. Most important for value creation is its Phase I/II drug, Squalamine, for the treatment of age-related macular degeneration (AMD) and, potentially, cancer. This anti-angiogenic drug has demonstrated safety and efficacy in treating wet AMD, and is likely to attract a lucrative pharmaceutical partnership in the near term. Squalamine is one of the only drugs for AMD that can be administered systemically rather than by injection in the eye. This competitive feature makes this product attractive despite its forecast late entrance to the market. The firm expects its IL-9 antibody for asthma to gain greater visibility as its partner, MedImmune, advances it in early stage clinical studies in 2004.
United Microelectronics (UMC 5.16 -0.04): Digitimes reported that United Microelectronics on February 26 announced that it has inked an agreement with Silicon Integrated Systems to acquire SiS foundry subsidiary SiS Microelectronics. The deal will give UMC more capacity in a cost effective way to meet its customers' growing demand for capacity. According to the article, UMC currently runs at 100% utilization. While building a new fab possibly requires $1 bln, UMC will acquire SiS Microelectronics for just over $300 mln. UMC will issue 357 million new shares to fund the acquisition.
Virage Logic (VIRL) 10.02 0.20 : Co announced that Adam Kablanian, Pres and CEO, has adopted a new stock trading plan under SEC Rule10b5-1. The new stock trading plan provides for sales during the term of the plan of up to 360,000 shares, subject to predetermined price and volume limits, but not more than 20,000 shares in any trading day. As of December 31, 2003, Kablanian held 3,791,161 shares of VIRL common stock.
10:30AM Novellus Systems (NVLS) 33.16 +0.33: After the close, Novellus Systems raised Q1 guidance during its mid-quarter update. Management sees EPS of $0.08-0.10 with a bias to the high end. Revenue is expected to come in at $245-255MM vs. prior guidance of $240-250MM. Reuters Research consensus is at $0.09 on $248.84MM.
Bookings are projected to come in at $330-340MM vs. prior guidance of $305-315MM. Shipments trending to $295-305MM.
Market conditions remain positive. Customers are cautiously optimistic.
Seeing mild softness in Japan as corporations close out the fiscal year but still relatively strong vs. previous years. Greater China and Korea continue to be strong. North America is showing moderate strength; saw some order delays. Europe is demonstrating the slowest growth of all markets.
200mm business is picking up but 300mm business remains stronger, with several 300mm CMP (chemical vapor deposition) and PVD (physical vapor deposition) wins.
NVLS shares are down over 26% since November 25, 2003 when we wrote that there is no justifiable upside even if NVLS grew revenue at 30% because the market is already pricing into NVLS shares sustained 30%+ revenue growth and factoring in over 2500 bps in gross and operating margin improvement. Additionally, most semiconductor capital equipment companies are priced for 30% plus growth but semiconductor industry capital expenditures are expected to grow below this rate in 2004 and contract by 2006. Given these industry dynamics, it is impossible for all companies to grow at over 30% (capture market share), implying industry growth either has to accelerate or companies have to raise prices, neither of which we view as sustainable.
There is limited upside on a trading basis even with the decline. We would continue to trade out of NVLS / the semiconductor capital equipment group given unsustainable growth and margin expectations, and above average price-multiple to growth ratios. The following table shows the trailing 12-months price/sales-to-sales growth ratio for semiconductor capital equipment companies vs. the Briefing.com Tech Index and the S&P 500 as of February 20, 2004.Ticker *P/SG Ratio Ticker *P/SG Ratio Ticker *P/SG Ratio Ticker *P/SG Ratio Ticker *P/SG Ratio
ACLS 2.6 BTUI 1.3 HELX 4.4 NANO 3.1 TWAV 1.8
ADEX 2.2 CKSNY 3.6 IBIS 4.5 NPTT 1.7 UTEK 2.8
AEHR 1.3 CMOS 2.3 IVIS 1.9 NVLS 3.5 VECO 2.5
AMAT 5.5 COHR 1.5 KLAC 6.4 NVMI 2.0 VSEA 2.5
AMTA 0.5 COHU 2.2 KLIC 0.9 PDFS 4.3 WFR 1.7
ASMI 1.1 CVV 0.4 KYO 1.3 PHTN 5.0 ZIGO 1.8
ASML 5.0 CYMI 4.7 LGVN 15.8 PLAB 1.4
ASYS 0.7 DPMI 1.2 LRCX 3.1 RTEC 4.2 BTI Tech Index 1.2
ASYT 1.8 EGLS 3.2 MKSI 2.8 SMTL 2.5
ATMI 3.0 EMKR 1.4 MRAE 1.2 SPA 0.4
AUGT 2.5 ENTG 2.0 MTCH 0.2 SPIR 2.1 S&P 500 1.0
BESI 1.5 FORM 3.7 MTSN 2.5 TER 2.5
BRKS 1.9 FSII 3.4 MYK 2.2 TGAL 2.4
*P/SG Ratio: (Price / Sales) / Sales Growth.
For investors seeking a semiconductor capital equipment play, we would continue to focus on ASM International (ASMI, 23.52 -0.34). ASMI has risen over 46% since we first mentioned the company on the Tech Stocks page (October 14, 2003) but remains one of the most attractively priced names within the group.--Ping Yu, Briefing.com
finance.yahoo.com |
