From Briefing.com: 6:21PM Thursday After Hours prices levels vs. 4 pm ET: The tide has changed as traders have been impressed with Intel's (INTC) mid-quarter update. The company gave a fairly bullish report, indicating that demand in its flash memory business (in which it competes with Advanced Micro Devices (00C) was tracking ahead of expectations. Presently, the S&P futures, at 1117, are 1 point above fair value, and the Nasdaq 100 futures, at 1449, are 3 points above fair value.
The below table gives Intel's update, as well as the other notable news items of the evening:
Company Stock Move Reason for Move
Elizabeth Arden (RDEN) 20.50
-0.91
(-4.3%) Beauty products company misses the Q1 (Apr) Reuters Research top and bottom-line consensus estimates - turning in a net loss of $0.56 per share; Shares were trading 8% off their 52-week lows, so investors have used the weak report as a reason to take profits; Elizabeth Arden's Board of Directors also approved a change in the fiscal year-end to June 30th from January 31st
Flextronics (FLEX) 16.75 +0.33 (+2.0%) Electronics manufacturing service name backs its Q1 (June) profits and sales outlook in a conference call, and also said profits in the second half of the year should exceed forecasts; Management said it's in the 'early stages of an expansion;' Reuters Research has $0.14 and $3.90 bln for Q1 EPS and revenue estimates; Flextronics added that talks to acquire factories from Nortel (NT) are 'progressing' and should add to earnings
Intel (INTC) 27.83 +0.42 (+1.5%) World's largest semiconductor company narrows its Q2 (June) revenue guidance to the high-end of its previous range (to $8.0-8.2 bln from $7.6-8.2 bln) and raises its gross margin target to 60-61% (plus or minus a couple of points) from 60%; Management said demand for architecture products is on target with expectations while communications revenue is higher than anticipated; Chip makers AMAT, KLAC, and NVLS also get a boost from the revised outlook
Mandalay Resort (MBG) 56.30 +1.68 (+3.1%) Casino operator delivers an 86% surge in Q1 (Apr) EPS, to $1.30 (consensus of $1.12), and an 18% rise in revenues, to $729.4 mln (consensus of $702.9 mln); All but one of Mandalay's Las Vegas Strip properties reported record quarterly results; Briefing.com has had a favorable view on the casino/gaming group, with an industry profile found in the Daily Sector Wrap archive for Mar 26
SkillSoft (SKIL) 9.15 -1.48 (-13.9%) Provider of e-learning content and technology tops the Street's Q1 (Apr) EPS and sales expectations, but cuts its Q2 (July), Q3 (Oct), and Q4 (Jan) earnings and revenue guidance; Company said that while it will achieve its planned bookings for the year, they will be more weighted toward the second half of the year; This doesn't explain why Q3 and Q4 targets were reduced, and the stock comes tumbling down as a result
Tomorrow, the much talked-about May employment report will be release at 8:30 ET, and market participants will be looking for +225K for nonfarm payrolls and 5.6% for the unemployment rate. Briefing.com discusses the market's potential reactions in today's installment of Looking Ahead.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap.
-- Heather Smith, Briefing.com
4:25PM Intel narrows Q2 guidance (INTC) 27.41 -0.60: Co expects revenue for Q2 to be between $8.0-8.2 bln, (previously $7.6-8.2 bln) Reuters consensus is $8.00 bln. Demand for Intel Architecture products is consistent with co's expectations at the beginning of the quarter and significantly higher than in the same period last year. Communications revenue is trending above co's previous expectations primarily due to increased demand for co's flash memory products. Gross margin percentage is expected to be between 60-61%, as compared to the previous expectation of 60%, plus or minus a couple of points. Co closed a state income tax audit relating to prior years' returns, and as a result will reduce its income tax expense by approx $60 mln during the quarter, which will slightly reduce the previous full year tax rate expectation of approx 32%.
4:20PM INTC trading up 50 cents in after hours :
4:17PM INTC sees Q2 gross margin 60-61% : -- Update --
4:16PM INTC sees Q2 sales $8.0-$8.2 bln, consensus $8.0 bln :
4:01PM Applied Micro appoints Tom Tullie as COO (AMCC) 5.04 -0.26: Co announced Tom Tullie was appointed COO. Mr. Tullie joined co in 1996 as V.P of Sales. In January 2001, he assumed the role of Sr V.P. of Sales and Operations, and in October 2003 took on the additional responsibilities of general manager of the communications unit. Mr. Tullie will retain his worldwide sales and general management of the communications group responsibilities.
Close Dow -67.06 at 10,195.91, S&P -8.36 at 1,116.63, Nasdaq -28.72 at 1,960.26: It was a choppy session, with the major averages trading in ranges of roughly 88, 9, and 23 points for the Dow, S&P 500, and Nasdaq, respectively... There were a lot of developments to keep track of, and stocks spent the bulk of the day searching for direction... To that effect, after opening in negative territory, the major averages were able to pare their losses in a noticeable fashion due to the declining price of crude oil and strong same store sales reports...
With respect to crude oil, OPEC announced that it was increasing supply quotas by 2 mln barrels a day, with an additional increase of 500K in August... While the market was originally disappointed with the extent of the announced production increases and the price of crude oil rose to as much as $40.85/bbl, it eventually started dropping, closing down 1.9%, or $0.74, at $39.22/bbl... May same store sales results were solid, with Wal-Mart (WMT 56.77 -0.42), for one, posting comps of 5.9% (consensus 4.8%)...
With the retailing sector having outperformed the broader market since the middle of May, however, participants couldn't place their finger on what to do with the group, which ended up selling on the news, then advancing into positive territory, but only to close back in the red... Confusing participants further was anticipation ahead of tomorrow's Employment report... While the consensus is for a Non-Farm Payrolls reading of 225K, economists' estimates range from 144K to 300K, with many observers looking for a number north of 300K with upward revisions to prior readings...
Expectations of a strong Employment report got the best of the market, which ended up retreating off its session highs in the second half of the day and closing in the red, as participants speculated that a strong payrolls number would more than likely incite fears that the FOMC can't afford to move in measured increments of just 25 basis points... Currently, fed funds futures are pricing in a 100% likelihood of a 25 basis point hike at the June meeting and a 50% likelihood of a 50 basis point hike... Looking at sector action at the close, there was no leadership to the upside, while laggards of note included influential sectors such as hardware, internet, networking, semiconductor, software, disk drive, biotech, industrials, oil services, materials, and transportation...
Elsewhere, the 10-year note closed up 7/32, bringing its yield down to 4.71%...NYSE Adv/Dec 888/2404, Nasdaq Adv/Dec 877/2224
3:38PM Seagate Technology (STX) 12.84 +0.63: Seagate Technology updated Q4 guidance after the close on Wednesday. The manufacturer of hard disc drives for computers and consumer electronics affirmed industry unit forecasts for the enterprise and mobile storage markets at 5.1MM and 14.5MM respectively, but lowered the market for personal storage products from 48MM units to 45-46MM units. The June quarter is typically back-end loaded, with June contributing almost 50% of unit shipments.
Management expects the company's personal and enterprise storage market share to be approximately 32% and 48%, respectively but the company's mobile storage market share could drop 2-3% points. Blended average unit price is expected to decline 5%.
The following table shows Q3 industry shipments in millions of units, management's initial and current expectations for the total available market, and estimated market share by segment for Q4. Segment Q3 Shipments Guidance Mkt Share
04/20 Current 04/20 Current
Personal Storage 46-47 48 45-46 32-34% 32-34%
Mobile Storage 14.5 14.5 14.5 7-8% 7-8%
Enterprise Storage 5.2 5.1 5.1 48-49% 48%
Management announced plans to cut annual operating expenses by $150MM. The company is expected to take a $50MM charge. The renewed emphasis on expense reduction follows a 450 bps Q/Q drop in gross margin to 21.7% in Q3 due to lower overall shipment volumes, aggressive pricing in the enterprise-class disk drives market and normal price declines in the notebook drive market.
STX shares, based on our inverted EVA/DCF model, are priced for sustained upper teens revenue growth from F06 assuming flat operating margin and aggressive working capital management; implied growth falls to lower teens assuming 15% operating margin.
The following table shows price multiples and Y/Y growth rates for STX compared against peers in the computer systems and peripherals group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Seagate Technology (STX) 0.8 8.1 0.9 0.9 0.9 3.0% (3.3%) (2.6%)
Maxtor (MXO) 0.4 14.3 0.4 0.4 0.4 8.1% 2.2% 3.1%
Western Digital (WDC) 0.6 11.8 0.8 0.8 0.8 18.9% 9.2% 3.7%
Komag (KOMG) 0.5 5.3 1.6 1.1 1.0 52.8% 43.4% 6.5%
Computer Systems & Peripherals 1.0 19.0 1.4 n/a 10.1% n/a
*P/SG Ratio: Normalized trailing 12 month (Price / Sales) / Growth ratio as of May 28, 2004.
**P/OPG Ratio: Normalized trailing 12 month (Price / Operating Income) / Growth ratio as of May 28, 2004.
STX is entering a new product cycle, with a number of products slated for release over the coming quarters. Management expects these products will expand the company's addressable opportunity from approximately 75% of the $23-25B market for drives to over 95%. The product transtion, new market entry (e.g. consumer electronics) and cost reductions suggest accelerating sales momentum and improving operating performance.
But shares are priced for sustained full year growth and operating performance significantly above eight year historical peak growth of 6.6% and operating margin of 10.7%. Furthermore, shares continues to trade at a premium to direct comps despite pulling back over 23% since the company's Q3 guidance, Story Stocks, March 3, 2004 when we advised investors to hold off buying shares until after a 10-15% pullback. Shares are down over 37% since the Q2 preview, Story Stocks, January 20, 2004, when we first advocated waiting for a pullback, citing competition and valuation concerns. We would wait for at least another 15-25% pullback, and/or signs of accelerating growth, stabilizing market share and improving execution before buying STX shares.--Ping Yu, Briefing.com
2:01PM Intel (INTC) 27.62 -0.39: The following commentary was published on Tuesday and is reposted here for ease of reference. Intel is scheduled to provide a mid-quarter business update after the close. During the Q1 conference call, management pegged Q2 revenue at $7.6-8.2B, gross margin at 60% +/- a few points, and operating expenses (R&D plus MG&A) at $2.4B. Full year gross margin is expected to be 62% +/- a few points, full year R&D to be $4.8B, and capital spending to be $3.6-4.0B. Reuters Research prints consensus EPS at $0.26 on $8.010B.
Listen for management to at least narrow guidance to high end of range.
Prerequisites for shares to move higher include both positive sales momentum and expanding margins. Look for improving traction on new product introductions, recent design wins and for increased enterprise IT spending, and for expanding margins as the company ramps 90nm production, improves results in the flash business, gains economies of scale in the wireless business and maintains a tight rein on operating expenses.
Looking beyond the quarter, Intel is driving convergence of computing and communications by integrating computing, wireless, broadband and memory technologies into modular solutions that allow customers to accelerate product development while improving product performance by orders of magnitude.
Centrino is one example of how Intel is defining and building a WiFi-, WiMax- and 3G-enabled ecosystem around Intel architectures from network processors for infrastructure solutions to applications processors for client solutions. New Hermon communications processor is a monolithic solution that brings 3G to the mainstream.
This is a long-term market building process. To put into perspective the global opportunity, television penetration is estimated to be at the equivalent of approximately 80% of the worldwide population, cellular phones 20%, and PCs 15%. Less than 5% of the population is broadband-enabled.
On the operating front, look for a pickup in the pace of margin improvement as shipments of 90nm-based CPUs exceed 130nm-based units in Q3. Intel is developing 0.65nm with production expected to begin in 2005.
Intel shares, based on our inverted EVA/DCF model, priced for sustained lower 20% revenue growth from C06 assuming upper 30% operating margin.
The following table shows price multiples and Y/Y growth rates for INTC compared against direct comps and the semiconductor group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Intel (INTC) 3.2 14.3 5.9 5.4 4.8 17.8% 13.8% 11.1%
Advanced Micro Devices (AMD) 0.6 (73.7) 1.4 1.1 0.9 61.0% 48.4% 11.5%
ATI Technologies (ATYT) 1.8 22.5 2.4 2.2 1.9 0.3% 34.9% 13.2%
nVidia (NVDA) 1.5 45.7 2.1 1.9 1.7 9.1% 13.6% 7.6%
Applied Micro Circuits (AMCC) 6.4 60.6 12.8 4.9 4.1 29.1% 58.0% 21.7%
Broadcom (BRCM) 3.0 (17.9) 7.2 5.2 4.3 58.4% 60.3% 19.0%
PMC Sierra (PMCS) 4.5 293.9 12.3 9.0 7.2 22.8% 37.0% 24.9%
Qualcomm (QCOM) 6.7 18.8 13.3 11.8 10.9 14.0% 14.4% 8.7%
Intersil (ISIL) 3.0 37.8 6.4 5.4 4.6 18.4% 18.5% 16.8%
Marvell Technology Group (MRVL) 2.8 63.0 7.6 5.3 4.4 62.3% 42.1% 21.7%
Sun Microsystems (SUNW) 0.9 (20.3) 1.3 1.4 1.3 (6.9%) (3.5%) 10.1%
Semiconductor Components 2.7 31.5 4.5 18.9%
*P/SG Ratio: Normalized trailing 12 month (Price / Sales) / Growth ratio as of May 28, 2004.
**P/OPG Ratio: Normalized trailing 12 month (Price / Operating Income) / Growth ratio as of May 28, 2004.
Intel shares trade close to fair value on an EVA/DCF basis and at a premium to comps on a multiples basis, which reflects company's market dominance. Modest upside for the patient investor.--Ping Yu, Briefing.com
biz.yahoo.com |
