Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (91409)	1/9/2024 4:50:26 PM
From: Return to Sender	Respond to of 95368

Aehr Reports Strong Revenue and Earnings Growth for the Second Quarter and First Six Months of Fiscal 2024 4:05 PM ET 1/9/24 \| Dow Jones Revises full-year fiscal 2024 guidance for revenue to be between $75 million and $85 million, and GAAP net income of between 20% and 25% of revenue FREMONT, CA / ACCESSWIRE / January 9, 2024 / Aehr Test Systems (NASDAQ:AEHR), a worldwide supplier of semiconductor test and burn-in equipment, today announced financial results for its second quarter of fiscal 2024 ended November 30, 2023. Fiscal Second Quarter Financial Results: -- Net revenue was $21.4 million, up 45% from $14.8 million in the second quarter of fiscal 2023. -- GAAP net income was $6.1 million, or $0.20 per diluted share, up 63% from GAAP net income of $3.7 million, or $0.13 per diluted share, in the second quarter of fiscal 2023. -- Non-GAAP net income, which excludes the impact of stock-based compensation, was $6.7 million, or $0.23 per diluted share, up 49% compared to non-GAAP net income of $4.5 million, or $0.16 per diluted share, in the second quarter of fiscal 2023. -- Bookings were $2.2 million for the quarter. -- Backlog as of November 30, 2023, was $3.0 million. -- Total cash and cash equivalents as of November 30, 2023 were $50.5 million, compared to $51.0 million at August 31, 2023. Fiscal First Six Months Financial Results: -- Net revenue was $42.1 million, up 65% from $25.5 million in the first six months of fiscal 2023. -- GAAP net income was $10.8 million, or $0.36 per diluted share, up 149% compared to GAAP net income of $4.3 million, or $0.15 per diluted share, in the first six months of fiscal 2023. -- Non-GAAP net income was $11.9 million, or $0.40 per diluted share, which excludes the impact of stock-based compensation, up 105% compared to non-GAAP net income of $5.8 million, or $0.20 per diluted share, in the first six months of fiscal 2023. -- Cash provided by operations was $3.4 million for the first six months of fiscal 2024. An explanation of the use of non-GAAP financial measures and a reconciliation of Aehr's non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the accompanying tables. Gayn Erickson, President and CEO of Aehr Test Systems, commented: "We had another solid quarter with strong year-over-year growth in revenue and net income as we continue to see increased demand for our wafer level test and burn-in products. Revenue for the quarter was $21.4 million, an increase of 45% year over year, and we generated non-GAAP net income of $6.7 million, slightly over 31% net profit. For the first half of the fiscal year, we grew revenue 65% over the same period last year. "In the last sixty days, we have seen how the slowing of the growth rate of the electric vehicle market has had a negative impact on the timing of several current and new customer orders and capacity increases for silicon carbide devices used in them. For clarity, we do not see the silicon carbide market decreasing, only a temporary slowing of the growth rate. We are also experiencing the impact of shifts in our customers' product mix, which specifically includes an increase in WaferPak(TM) full wafer contactors from our lead silicon carbide customer. The net of this is that we now expect a delay in the timing of new orders from current and new customers that will most likely impact this fiscal year's revenue. "Given the latest forecasts from our customers and the uncertainty on the timing of their orders, we believe it makes sense to take a more conservative approach to our fiscal year forecast and have reduced our growth estimates for fiscal 2024 revenue. We are reducing our revenue expectations of at least $100 million this fiscal year by 15% to 25% to a range of $75 million to $85 million dollars. This is still a growth rate of 15% to 30% year over year. "Despite this uncertainty in the timing of orders, we remain confident about the future demand for our unique semiconductor test solutions and the markets they address. We have not reduced our growth expectations for the years ahead, where we continue to see tremendous opportunity. We continue to hear from our current customers as well as companies we are engaged in evaluations with that wafer level burn-in is critical to their product roadmaps to address multiple large and growing markets, including battery and hybrid electric vehicles, industrial and solar power conversion, data and telecommunications infrastructure, and the new and coming optical I/O and co-packaged optics semiconductor markets. "Last month, we announced our first order for a FOX(TM) wafer level test and burn-in system to be used for gallium nitride (GaN) applications. This customer is a leading global supplier of semiconductor devices used in electric vehicles and power infrastructure and adds another major customer to the list of companies using Aehr's FOX products for wafer level test and burn-in of wide bandgap compound semiconductors. We were able to ship this system within a few weeks to meet their needs. We are now working with two of the market leaders in gallium nitride, which positions us front and center in a market that we believe is another potential growth driver for our wafer level solutions. "We continue to make great progress with our previously announced benchmarks and engagements with prospective new customers, including the significant automotive qualification of wafer level burn-in we have been doing with one of the market leaders in silicon carbide (SiC). We believe we have a large opportunity with this potential new customer and feel confident they will move forward with our FOX-XP multi-wafer solution for their high-volume needs, but the timing is taking longer than anticipated. We remain confident that we will receive initial purchase orders from them in fiscal 2024; however, it is not clear whether they will have the infrastructure ready to take shipments from us within our fiscal year that ends on May 31(st) . "We have made significant progress in expanding our customer base for SiC and GaN wafer level burn-in for a wide variety of applications. We currently have a total of seven customers purchasing our solutions for SiC and GaN devices and are also actively engaged with more than two dozen SiC and GaN companies to address their needs for wafer level test and burn-in of these devices. Importantly, 10 of these additional companies have already engaged with Aehr for on-wafer benchmarks. We have never lost a full wafer level burn-in evaluation since introducing our FOX-NP and XP configured with the SiC and GaN nitride test resources, and we believe we will have over 12 SiC/GaN customers buying our wafer level test and burn-in solutions by the end of calendar 2024. "In anticipation of both our current and new customers' forecasted needs, Aehr has put in place the inventory, infrastructure, and processes to increase our manufacturing and installation capacity as well as significantly lower our lead times to meet our customers' future capacity needs. "While we have seen delays in orders from our automotive customers, we are seeing a pick-up in opportunities for SiC wafer level burn-in for applications outside of the electric vehicle market, including industrial, solar, and commuter electric trains as the efficiency and value of SiC is being recognized for these additional markets. While the largest market opportunity for SiC is still electric vehicles and charging infrastructure, industrial and other power conversion market segments represent significant additional opportunities for SiC and for Aehr's products. William Blair forecasts that the total silicon carbide market is growing at a CAGR of greater than 40% to $8.5 billion in 2025, and over 25% of that will be in industrial and energy power conversion applications. "We are also excited about the potential for the new silicon photonic optical I/O or co-packaged optics market and are expecting to ship our first FOX production system in our third fiscal quarter. This FOX-XP system with new high-power WaferPaks is configured to enable cost-effective production test of up to 3,500 watts of power per wafer and up to nine full wafers in parallel. It also enables our customers to easily dock to our new FOX WaferPak Auto Aligner for hands free operation of 6" to 12" wafers using industry standard wafer cassettes and FOUPs including robotic and overhead transport of wafers in FOUPs. This new FOX-XP configuration allows for the testing of as many as 8,000 high-power optical devices in parallel on each of nine wafers before they are singulated and placed into a photonic application such as fiberoptic transceiver modules or for placement in co-packaged optics for optical chip-to-chip communication, as has been announced on product roadmaps by companies including Nvidia, Intel, AMD, TSMC, and GlobalFoundries. "As we look ahead, we expect continued strong demand for our wafer level burn-in solutions for the markets we currently address, as well as increased demand from the new market opportunities we are seeing. Even with our more conservative guidance, we expect solid year-over-year revenue growth and believe we are poised for continued strong growth for years to come." Fiscal 2024 Financial Guidance: For the fiscal year ending May 31, 2024, Aehr is revising its expected full year total revenue to be between $75 million and $85 million, representing growth of 15% to 30% year over year, and GAAP net income of between 20% and 25% of revenue. Management Conference Call and Webcast: Aehr Test Systems will host a conference call and webcast today at 5:00 p.m. Eastern (2:00 p.m. PT) to discuss its second quarter fiscal 2024 operating results. To access the live call, dial +1 877-545-0523 (US and Canada) or +1 973-528-0016 (International) and give the participant passcode 779208. 2024-01-09 21:05:00 GMT Aehr Reports Strong Revenue and Earnings Growth -2- In addition, a live and archived webcast of the conference call will be available over the Internet at www.aehr.com in the Investor Relations section and may also be accessed by clicking here. A phone replay of the conference call will also be available beginning approximately two hours after conclusion of the live call and will remain available for one week. To access the call replay, dial +1 877-481-4010 (US and Canada) or +1 919-882-2331 (International) and enter replay passcode 49607. About Aehr Test Systems Headquartered in Fremont, California, Aehr Test Systems is a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor devices in wafer level, singulated die, and package part form, and has installed thousands of systems worldwide. Increasing quality, reliability, safety, and security needs of semiconductors used across multiple applications, including electric vehicles, electric vehicle charging infrastructure, solar and wind power, computing, data and telecommunications infrastructure, and solid-state memory and storage, are driving additional test requirements, incremental capacity needs, and new opportunities for Aehr Test products and solutions. Aehr has developed and introduced several innovative products including the FOX-P(TM) families of test and burn-in systems and FOX WaferPak(TM) Aligner, FOX WaferPak Contactor, FOX DiePak (00) Carrier and FOX DiePak Loader. The FOX-XP and FOX-NP systems are full wafer contact and singulated die/module test and burn-in systems that can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and other power semiconductors, 2D and 3D sensors used in mobile phones, tablets, and other computing devices, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices. The FOX-CP system is a low-cost single-wafer compact test solution for logic, memory and photonic devices and the newest addition to the FOX-P product family. The FOX WaferPak Contactor contains a unique full wafer contactor capable of testing wafers up to 300mm that enables IC manufacturers to perform test, burn-in, and stabilization of full wafers on the FOX-P systems. The FOX DiePak Carrier allows testing, burning in, and stabilization of singulated bare die and modules up to 1024 devices in parallel per DiePak on the FOX-NP and FOX-XP systems up to nine DiePaks at a time. For more information, please visit Aehr Test Systems' website at www.aehr.com. Forward-Looking Statements This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or Aehr's future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "going to," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts, " "potential," "sees," or "continue," or the negative of these words or other similar terms or expressions that concern Aehr's expectations, strategy, priorities, plans, or intentions. Forward-looking statements in this press release include, but are not limited to, Aehr's ability to generate bookings and revenue increases in the future; the timing of Aehr's ability to recognize revenue; future requirements and orders of Aehr's new and existing customers; bookings forecasted for proprietary WaferPak(TM) and DiePak consumables across multiple market segments; shipping timelines for products and new and follow-on capacity orders; the impact of shifting sales mix on revenue; the growth of Aehr's systems and consumables, including as a percentage of total revenue; financial guidance for fiscal 2024, including related to revenue and profitability, and expectations regarding fiscal 2024; Aehr's ability to expand its number of customers using its FOX-P(TM) solutions and the timing of such expansion; the ability to secure potential customer engagements and Aehr's plans to meet with potential new customers and end users; expectations related to long-term demand for Aehr's products; market opportunity expansion; the growth and attractiveness of key markets and Aehr's ability to receive orders and generate revenue in the future. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Aehr's recent 10-K, 10-Q and other reports filed from time to time with the Securities and Exchange Commission. Aehr disclaims any obligation to update information contained in any forward-looking statement to reflect events or circumstances occurring after the date of this press release. AEHR TEST SYSTEMS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended -------------------------- ---------------- Nov 30, Aug 31, Nov 30, Nov 30, Nov 30, (In thousands, except per share data) 2023 2023 2022 2023 2022 ------- ------- ------- ------- ------- Revenue: Product $19,837 $19,357 $14,007 $39,194 $23,595 Services 1,594 1,267 808 2,861 1,891 ------ ------ ------ ------ ------ Total revenue 21,431 20,624 14,815 42,055 25,486 Cost of revenue: Product 9,707 9,919 6,497 19,626 12,011 Services 766 724 407 1,490 1,083 ------ ------ ------ ------ ------ Total cost of revenue 10,473 10,643 6,904 21,116 13,094 ------ ------ ------ ------ ------ Gross profit 10,958 9,981 7,911 20,939 12,392 Operating expenses: Research and development 1,972 2,457 1,551 4,429 3,049 Selling, general and administrative 3,518 3,409 2,875 6,927 5,400 ------ ------ ------ ------ ------ Total operating expenses 5,490 5,866 4,426 11,356 8,449 ------ ------ ------ ------ ------ Income from operations 5,468 4,115 3,485 9,583 3,943 Interest income, net 631 581 263 1,212 384 Other income (expense), net 10 (6) (5) 4 19 ------ ------ ------ ------ ------ Income before provision for income taxes 6,109 4,690 3,743 10,799 4,346 Provision for income taxes 20 16 18 36 32 ------ ------ ------ ------ ------ Net income $ 6,089 $ 4,674 $ 3,725 $10,763 $ 4,314 ====== ====== ====== ====== ====== Net income per share: Basic $ 0.21 $ 0.16 $ 0.14 $ 0.37 $ 0.16 Diluted $ 0.20 $ 0.16 $ 0.13 $ 0.36 $ 0.15 Shares used in per share calculations: Basic 28,801 28,649 27,579 28,725 27,410 Diluted 29,769 29,632 29,080 29,700 28,934 AEHR TEST SYSTEMS Reconciliation of GAAP to Non-GAAP Results (Unaudited) Three Months Ended Six Months Ended -------------------------- ----------------- Nov Nov 30, Aug 31, 30, Nov 30, Nov 30, (In thousands, except per share data) 2023 2023 2022 2023 2022 ------- ------- ------ ------- ------- Reconciliation of GAAP to non-GAAP gross profit GAAP gross profit $10,958 $ 9,981 $7,911 $20,939 $12,392 Special items: a) Stock-based compensation expense 101 63 85 164 177 ------ ------ ----- ------ ------ Non-GAAP gross profit $11,059 $10,044 $7,996 $21,103 $12,569 ====== ====== ===== ====== ====== Reconciliation of GAAP to non-GAAP operating expenses GAAP operating expenses $ 5,490 $ 5,866 $4,426 $11,356 $ 8,449 Special items: a) Stock-based compensation expense (537) (459) (708) (996) (1,326) ------ ------ ----- ------ ------ Non-GAAP operating expenses $ 4,953 $ 5,407 $3,718 $10,360 $ 7,123 ====== ====== ===== ====== ====== Reconciliation of GAAP to non-GAAP income from operations GAAP income from operations $ 5,468 $ 4,115 $3,485 $ 9,583 $ 3,943 Special items: a) Stock-based compensation expense 638 522 793 1,160 1,503 ------ ------ ----- ------ ------ Non-GAAP income from operations $ 6,106 $ 4,637 $4,278 $10,743 $ 5,446 ====== ====== ===== ====== ====== Reconciliation of GAAP to non-GAAP income before taxes GAAP income before taxes $ 6,109 $ 4,690 $3,743 $10,799 $ 4,346 Special items: a) Stock-based compensation expense 638 522 793 1,160 1,503 ------ ------ ----- ------ ------ Non-GAAP income before taxes $ 6,747 $ 5,212 $4,536 $11,959 $ 5,849 2024-01-09 21:05:00 GMT Aehr Reports Strong Revenue and Earnings Growth -3- ====== ====== ===== ====== ====== Reconciliation of GAAP to non-GAAP net income GAAP net income $ 6,089 $ 4,674 $3,725 $10,763 $ 4,314 Special items: a) Stock-based compensation expense 638 522 793 1,160 1,503 ------ ------ ----- ------ ------ Non-GAAP net income $ 6,727 $ 5,196 $4,518 $11,923 $ 5,817 ====== ====== ===== ====== ====== GAAP earnings diluted per share $ 0.20 $ 0.16 $ 0.13 $ 0.36 $ 0.15 Non-GAAP earnings diluted per share $ 0.23 $ 0.18 $ 0.16 $ 0.40 $ 0.20 Non-GAAP measures should not be considered a replacement for GAAP results. The Non-GAAP measures indicated above are financial measures the Company uses to evaluate the underlying results and operating performance of the business. The limitation of these measures are that they exclude items that impact the Company's current period GAAP measures. This limitation is best addressed by using these measures in combination with the most directly comparable GAAP financial measures. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. We believe these measures enhance investors' ability to review the Company's business from the same perspective as the Company's management and facilitate comparisons of this period's results with prior periods. AEHR TEST SYSTEMS CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) November 30, May 31, (In thousands, except par value) 2023 2023 --------- -------- ASSETS Current assets: Cash and cash equivalents $ 50,514 $ 30,054 Short-term investments - 17,853 Accounts receivable, net 4,573 16,594 Inventories 33,817 23,908 Prepaid expenses and other current assets 2,861 621 -------- ------- Total current assets 91,765 89,030 Property and equipment, net 3,185 2,759 Operating lease right-of-use assets, net 5,987 6,123 Other non-current assets 238 231 Total assets $ 101,175 $ 98,143 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,183 $ 9,206 Accrued expenses 3,232 4,143 Operating lease liabilities, short-term 397 137 Deferred revenue, short-term 147 2,822 -------- ------- Total current liabilities 7,959 16,308 Operating lease liabilities, long-term 6,016 6,163 Deferred revenue, long-term 4 31 Other long-term liabilities 42 41 -------- ------- Total liabilities 14,021 22,543 Shareholders' equity: Preferred stock, $0.01 par value: Authorized: 10,000 shares; Issued and outstanding: none - - Common stock, $0.01 par value: Authorized: 75,000 shares; Issued and outstanding: 28,826 shares and 28,539 shares at November 30, 2023 and May 31, 2023, respectively 288 285 Additional paid-in-capital 128,543 127,776 Accumulated other comprehensive loss (134) (155) Accumulated deficit (41,543) (52,306) -------- ------- Total shareholders' equity 87,154 75,600 -------- ------- Total liabilities and shareholders' equity $ 101,175 $ 98,143 ======== ======= The Condensed Consolidated Balance Sheet as of May 31, 2023 has been derived from the audited consolidated financial statements. AEHR TEST SYSTEMS CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended November 30 ------------------- (In thousands) 2023 2022 ------- --------- Cash flows from operating activities: Net income $10,763 $ 4,314 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation expense 1,160 1,503 Depreciation and amortization 283 225 Accretion of investment discount (130) (64) Amortization of operating lease right-of-use assets 337 356 Provision for doubtful accounts - 24 Changes in operating assets and liabilities: Accounts receivable 12,037 2,618 Inventories (9,996) (3,094) Prepaid expenses and other current assets (2,245) (196) Accounts payable (5,099) (210) Accrued expenses (974) (1,045) Deferred revenue (2,703) 1,221 Operating lease liabilities (89) (390) Income taxes payable 12 4 Net cash provided by operating activities 3,356 5,266 ------ -------- Cash flows from investing activities: Purchases of property and equipment (440) (99) Proceeds from maturities of investments 18,000 - Purchases of investments - (17,652) Net cash provided by (used in) investing activities 17,560 (17,751) ------ -------- Cash flows from financing activities: Proceeds from issuance of common stock under employee plans 1,092 1,112 Shares repurchased for tax withholdings on vesting of restricted stock units (1,460) (1,216) Issuance cost of common stock offering (72) - Net cash used in financing activities (440) (104) ------ -------- Effect of exchange rate changes on cash, cash equivalents and restricted cash (16) (21) Net increase (decrease) in cash, cash equivalents and restricted cash 20,460 (12,610) Cash, cash equivalents and restricted cash, beginning of period (1) 30,204 31,564 Cash, cash equivalents and restricted cash, end of period (1) $50,664 $ 18,954 ====== ======== (1) Includes restricted cash in other assets. CONTACT: Aehr Test Systems Chris Siu Chief Financial Officer csiu@aehr.com or MKR Investor Relations Inc. Todd Kehrli or Jim Byers Analyst/Investor Contact (323) 468-2300 aehr@mkr-group.com SOURCE: Aehr Test Systems View the original press release on accesswire.com > Dow Jones Newswires January 09, 2024 16:05 ET (21:05 GMT)

To: Return to Sender who wrote (91409)

1/10/2024 5:06:16 PM

From: Return to Sender

4 Recommendations

Recommended By
bull_dozer
Julius Wong
kckip
Sr K

Read Replies (1) | Respond to of 95368

Market Snapshot

briefing.com

Dow	37695.73	+170.57	(0.45%)
Nasdaq	14969.65	+111.94	(0.75%)
SP 500	4783.45	+26.95	(0.57%)
10-yr Note	-2/32	4.03

NYSE	Adv 1572	Dec 1202	Vol 841 mln
Nasdaq	Adv 2078	Dec 2136	Vol 4.4 bln

Industry Watch

Strong: Communication Services, Consumer Discretionary, Real Estate, Industrials, Consumer Staples

Weak: Energy, Materials, Financials, Utilities

Moving the Market

-- Wait-and-see ahead of the December Consumer Price Index on Thursday and earnings results from big banks on Friday

-- Ongoing strength in mega cap stocks

-- Reacting to remarks from New York Fed President Williams indicating he believes the Fed will need to maintain a restrictive policy stance for some time

Closing Summary
10-Jan-24 16:30 ET

Dow +170.57 at 37695.73, Nasdaq +111.94 at 14969.65, S&P +26.95 at 4783.45
[BRIEFING.COM] The three major indices closed near their highs of the day. The S&P 500 logged a 0.6% gain and turned positive for the year; the Dow Jones Industrial Average saw a 0.5% gain; and Nasdaq Composite registered a 0.8% gain.

Mega cap stocks boosted index level gains. The Vanguard Mega Cap Growth ETF (MGK) gained 1.2%. Apple (AAPL 186.19, +1.05, +0.6%) had been down as much as 0.7%, but managed to close with a gain despite another analyst downgrade from Redburn Atlantic, which cut its view to Neutral from Buy.

Meta Platforms (META 370.47, +13.04, +3.7%) and NVIDIA (NVDA 543.50, +12.10, +2.3%) were among the top standouts in the mega cap space, helping to offset modest weakness in Tesla (TSLA 233.94, -1.02, -0.4%).

The aforementioned stocks boosted their respective S&P 500 sectors, which closed with the largest gains among the 11 sectors. The health care sector (+0.4%) was another winner, along with the industrial sector (+0.5%). Meanwhile, the energy sector (-1.0%) saw the largest decline by a decent margin, sliding alongside oil prices. WTI crude oil futures fell 1.0% to $71.41/bbl.

There was a general lack of conviction from either buyers or sellers today. Declining issues had a slim lead over advancing issues at the Nasdaq while advancers led decliners by a 5-to-4 margin. The equal-weighted S&P 500 logged only a 0.2% gain today.

The muted price action under the surface was due to a wait-and-see mindset ahead of the results from today's $37 billion 10-yr note auction, an afternoon speech from New York Fed President Williams (FOMC voter) on the economic outlook, Thursday's release of the December Consumer Price Index, and earnings reports out of the banking industry before Friday's open.

The 10-yr note reopening was met with decent demand, but the market was more responsive to the remarks from Mr. Williams, who said in a speech that he thinks the Fed will need to maintain a restrictive policy stance for some time.

The major indices all pulled back from session highs, which had the S&P 500 within six points of its all-time closing high (4,796.56), in response to Mr. Williams' comments.

Treasuries settled little changed from yesterday. The 2-yr note yield fell two basis points to 4.36% and the 10-yr note yield rose one basis point to 4.03%.

S&P 500: +0.3%
Dow Jones Industrial Average: UNCH
Nasdaq Composite: -0.3%
S&P Midcap 400: -1.6%
Russell 2000: -2.8%

Reviewing today's economic data:

Weekly MBA Mortgage Applications Index 9.9%; Prior -9.4%
November Wholesale Inventories -0.2% (Briefing.com consensus -0.2%); Prior was revised to -0.3% from -0.4%

Thursday's economic calendar features:

8:30 ET: December Consumer Price Index (Briefing.com consensus 0.2%; prior 0.1%) and Core Consumer Price Index (Briefing.com consensus 0.2%; prior 0.3%); Weekly initial jobless claims (Briefing.com consensus 209,000; prior 202,000) and continuing claims (prior 1.855 million)
10:30 ET: Weekly EIA Natural Gas Inventories (prior -14 bcf)
14:00 ET: Treasury Budget (prior -$314.0 billion)

Market pullback coincides with NY Fed President comments
10-Jan-24 15:30 ET

Dow +149.63 at 37674.79, Nasdaq +101.32 at 14959.03, S&P +23.99 at 4780.49
[BRIEFING.COM] The major indices pulled back from session highs. The pullback coincided with New York Fed President Williams (FOMC voter) saying in a speech that he thinks the Fed will need to maintain a restrictive policy stance for some time.

The S&P 500 was approaching its all-time high close (4,796.56) earlier, reaching 4,790.80 at its best level of the day.

Separately, the 2-yr note yield fell two basis points to 4.36% and the 10-yr note yield rose one basis point to 4.03% after today's mediocre $37 bln 10-yr note reopening.

Small cap stocks join rally; Energy complex futures slide
10-Jan-24 15:00 ET

Dow +194.61 at 37719.77, Nasdaq +139.60 at 14997.31, S&P +32.71 at 4789.21
[BRIEFING.COM] Small and mid cap stocks have joined the rally. The Russell 2000 is up 0.1% and the S&P Mid Cap 400 is up 0.2%.

Energy complex futures settled the session lower. WTI crude oil futures fell 1.0% to $71.41/bbl and natural gas futures fell 5.6% to $2.55/mmbtu. The S&P 500 energy sector is still underperforming the broader market, trading down 0.9%.

Most of the sectors are trading up, though, and three of them sport gains greater than 1.0%.

PANW gains on sell side action, Howmet catches upgrade on way to solid gains in S&P 500
10-Jan-24 14:30 ET

Dow +165.34 at 37690.50, Nasdaq +126.68 at 14984.39, S&P +28.02 at 4784.52
[BRIEFING.COM] The major averages pushed higher in the last half hour, the S&P 500 (+0.59%) in second place, finding gains north of 28 points on their way to a six-session high.

Elsewhere, S&P 500 constituents Palo Alto Networks (PANW 315.63, +15.21, +5.06%), Uber (UBER 62.39, +2.09, +3.47%), and Howmet Aerospace (HWM 55.54, +1.83, +3.41%) dot the top of today's standings. PANW gains owing in part to a Morgan Stanley target raise to $375, UBER is reportedly moving on notable options activity, while HWM gains after an upgrade to Buy at Truist this morning.

Meanwhile, New Jersey-based diagnostics firm Quest Diagnostics (DGX 136.39, -5.72, -4.03%) is at the bottom of the S&P despite a dearth of corporate news.

Gold lower amid rising equities, yields
10-Jan-24 14:00 ET

Dow +80.88 at 37606.04, Nasdaq +91.00 at 14948.71, S&P +18.46 at 4774.96
[BRIEFING.COM] The Nasdaq Composite (+0.61%) still holds the lead, hovering near HoDs, with about two hours to go on Wednesday afternoon.

Gold futures settled $5.20 lower (-0.3%) to $2,027.80/oz, held in check by a rallying equity market and modest gains in yields.

Meanwhile, the U.S. Dollar Index is down about -0.2% to $102.38.

Page One

Last Updated: 10-Jan-24 08:59 ET | Archive
Market sees points of hesitation
The start of 2024 has been a bit skittish for the major indices and the Treasury market. There has been some understandable selling activity, some understandable rebound activity, and some altogether indeterminate price action.

Some added attention has been paid to the "failure" of the Santa Claus Rally, which, frankly, we don't see as a true failure given the massive percentage gains that preceded it, and to the first five trading days of 2024 culminating in a cumulative 0.1% decline for the S&P 500.

Those shortcomings, if you will, are apt to cause some undue concern for anyone who treats such seasonal patterns as gospel. The saving grace for them, we suppose, would be if the S&P 500 can regroup and close out January with a plus sign next to it.

There is plenty of January left for that to happen. Heck, the S&P 500 is only down 0.3% for the year coming into today -- and it is coming into today without a lot of conviction.

Currently, the S&P 500 futures are down two points and are trading 0.1% below fair value, the Nasdaq 100 futures are down 11 points and are trading 0.1% below fair value, and the Dow Jones Industrial Average futures are down five points and are trading fractionally below fair value.

Some points of hesitation include the $37 billion 10-yr note auction today at 1:00 p.m. ET, the specter of the December Consumer Price Index, which will be released on Thursday, the official start of the Q4 earnings reporting season on Friday, and a 0.4% decline in Apple (AAPL) following yet another downgrade.

Redburn Atlantic cut its view on Apple to Neutral from Buy due in part to rising regulatory risk and what it thinks could be an underwhelming March quarter. That is the third downgrade of Apple since the start of the year.

Most of the mega-cap stocks were able to overcome early weakness yesterday, which enabled the broader market to bounce back from early losses. Today's open is likely to be a flattish one, so traders will be looking for trading cues in the price action of both the mega-cap stocks and the small-cap stocks. Both were instrumental in powering the market's year-end rally and both have been instrumental in the downshift to begin 2024.

Separately, mortgage demand powered up in the latest week. According to the Mortgage Bankers Association, mortgage applications increased 9.9% last week with refinance applications up 19% and purchase applications up 6%.

There is also a lot of energy in the trading of Bitcoin and Bitcoin-related stocks, as market participants await word on whether the SEC is going to approve a spot Bitcoin ETF. It appeared after yesterday's close that the approval was granted, but just as soon as that headline hit, SEC Chair Gary Gensler said in an X update that the @SECGov account was compromised and that the SEC has not approved the listing and trading of spot Bitcoin ETFs.

That doesn't necessarily mean the SEC isn't approving them, only that there was no official announcement on the decision yesterday.

There was an official announcement today, however, that Hewlett-Packard Enterprise (HPE) will acquire Juniper Networks (JNPR) in an all-cash transaction for approximately $14 billion or $40.00 per share.

-- Patrick J. O'Hare, Briefing.com

PriceSmart shares being bought in bulk today following upside Q1 results (PSMT)
Based on PriceSmart's (PSMT) upside 1Q24 results, it's evident that purchasing food and other essential items in bulk in order to find better value isn't just a U.S. phenomenon. Last night, the membership warehouse club operator with a presence in Central America, Colombia, and the Caribbean reported strong comparable net merchandise sales growth of 8.0%, fueling an 11% increase in adjusted EPS to $1.24.

Similar to its U.S.-based counterpart Costco (COST), PSMT is experiencing steady membership growth and very healthy renewal rates. This is reflected in PSMT's 11% increase in membership income to $17.7 mln. Although the company didn't disclose its renewal rate in the Q1 earnings press release, the metric has been hovering around the upper-80% range in recent quarters.
Unlike COST, PSMT has implemented a membership price hike recently, announcing a $5 increase in most of its markets last quarter. These fee increases will take hold on a staggered basis in most of its markets throughout FY24. This will help to support healthy membership income growth in the coming quarters.
The foods category has been a consistent standout, and that likely remained the case in Q1, but PSMT's health services have generated very strong growth. Last quarter, health services -- including optical, audiology, and pharmacy -- achieved growth of 91%. PSMT will likely hash out the specific category growth rates when the earnings call begins at noon E.T.
Store expansion is a key pillar of PSMT's growth strategy. The company ended the quarter with 53 clubs, up from 50 as of November 30, 2022, and it has plans to open another club in El Salvador in February. For a point of comparison, COST currently operates over 870 warehouses on a global basis.

The main takeaway is that, like COST, PSMT continues to benefit from a budget-conscious consumer, positioning the company to achieve strong comp growth and membership growth. In terms of its total addressable market, PSMT is only scratching the surface and has a long runway ahead in terms of club expansion.

WD-40 surges following top and bottom-line beats in Q1, aided by sustained positive trends (WDFC)

WD-40's (WDFC +13%) top and bottom-line beats in Q1 (Nov), accompanied by reiterated FY24 guidance, are stirring up considerable enthusiasm today, pushing its shares to levels not seen since April 2021. Carrying the household and multi-use product maker, most known for its WD-40 brand, to such solid quarterly results was sustained improvements in trends seen last quarter.

Volume-related sales growth occurred across each of WDFC's geographies. The company estimates that approximately 65% of its constant currency revenue increase stemmed from volume gains, underpinning healthy demand and not just inflation-driven growth.
In total, revenue climbed by 12.4% yr/yr to $140.4 mln, led by WDFC's EIMEA segment (Europe, India, Middle East, Africa), which headed 20% higher. Meanwhile, the Americas (United States, Latin America, and Canada) and Asia-Pacific (including Australia and China) recorded sales growth of +10% and +6%, respectively.
- Within WDFC's markets, there were a few items worth mentioning. WDFC's core maintenance products sustained robust demand from the last quarter across the Americas. In Europe, volumes did slip as customers continued adjusting to price hikes. Meanwhile, in Australia, sales turned positive after a double-digit decline in Q4 (Aug), while demand in China remained buoyant.
WDFC's top-line gains are flowing to its bottom line, which, combined with a 240 bp improvement in gross margins yr/yr, led to a 25.4% expansion in the company's EPS to $1.28.
Management briefly updated its homecare and cleaning business, which comprised just 6% of total sales in Q1. WDFC is undergoing a strategic review regarding the future of this business. Given how its maintenance products represent much more favorable margins, it would not be shocking to see WDFC offload this division in the near term.
Looking ahead, WDFC reiterated its FY24 (Aug) outlook, continuing to project EPS of $4.78-5.15 and +6-12% net sales growth yr/yr. Management again discussed its strategic longer-term framework this quarter, reiterating its commitment to building brand awareness, penetrating additional markets, and accelerating premiumization. WDFC has made excellent progress on these fronts, boasting strong growth of 49% in the DACH region (Germany, Austria, and Switzerland), 23% in Mexico, 42% in France, and 59% across Spain and Portugal. Meanwhile, WDFC's decent margin expansion in Q1 showcases its premiumization focus.

WDFC faced several setbacks over the past two years, exacerbated by relentless supply chain hiccups and uneven post-pandemic recoveries across its global markets. However, underneath the problems was sound end-market demand. With many headwinds that plagued WDFC since late 2021 now beginning to ease, a new wind is propelling the company forward, built on top of resilient demand dynamics, boding well for WDFC to make further in-roads on its strategic pillars in 2024.

SMART Global extends its stock rally on better-than-expected Q1 results (SGH)

SMART Global (SGH +12%) extends its stock rally today following better-than-expected adjusted earnings growth in Q1 (Nov), solid margin expansion, and a new $75 mln share repurchase authorization. Revenue was still on the lighter side, albeit in-line with consensus, as was SGH's Q2 (Feb) revenue guidance.

SGH has three distinct businesses: Intelligent Platform Solutions (IPS), Memory Solutions, and LED Solutions. IPS is the company's largest segment, comprising over 43% of Q1 sales, and consists of high-performance computing (HPC), AI, and IoT platform technologies. Memory Solutions -- SGH's only segment five years ago -- houses SGH's DRAM and Flash-based memory products, totaling 31% of Q1 revs. LED Solutions comprises application-optimized LEDs and the rest of SGH's revenue.

Outside of LED Solutions, which grew sales by a modest 5.6% yr/yr, SGH continued to endure declining revenue across its business lines, registering an 18.3% decrease in IPS and an 18.6% drop in Memory Solutions. As a result, total revenue fell by 30.0% to $274.25 mln, a deterioration from the -27.7% decline in 4Q23 and -17.1% in 3Q23 (May).
Supply chain constraints remained a headwind in SGH's IPS business, which kept lead times extended for certain components, impacting how quickly the company could ramp up existing and new customer projects. Meanwhile, elevated inventory levels at several of SGH's large customers hindered Memory Solutions demand.
On the bright side, Management mentioned that it is noticing increasing interest in AI technology, citing growing traction across defense, finance, cloud service providers, and many other verticals. SGH anticipates that 2024 will be underpinned by increasing market adoption of AI. At the same time, SGH stated that the cyclical downturn in memory is abating and believes it already reached the bottom of the cycle.
Margins were a high point for SGH, increasing its non-GAAP gross margins by 200 bps yr/yr to 33.3%, clearing the high end of its 32.5% forecast. As a result, SGH returned to topping adjusted earnings estimates in the quarter, delivering $0.24 per share.
Looking to Q2, while trends are improving, the overall macroeconomic environment remains challenging. It also does not help that LED Solutions is heading into typical seasonality, suppressing top-line growth in this segment over the next quarter. Therefore, SGH anticipates declining yr/yr revenue growth in Q2, projecting $260-310 mln. Conversely, margins remain buoyant, assisting SGH's bottom line, which it expects will be $0.15-0.35 in Q2, most of which was ahead of consensus.

While not exactly stunning, SGH's Q1 report was strikingly improved from its dismal Q4 (Aug) report in mid-October, when the company posted sizeable misses on its top and bottom lines while also projecting Q1 numbers well below consensus. The contrast was more than sufficient for investors to keep pushing SGH's shares higher, now up over +50% since hitting one-year lows on its previous quarterly report.

Intuitive Surgical up sharply as improved procedure growth fuels upside Q4 guidance (ISRG)
Robotic surgery company Intuitive Surgical (ISRG) has been on the mend over the past couple of months and that strength is continuing today after the company issued upside Q4 revenue guidance on better-than-expected da Vinci system procedure growth.

Bolstered by a recovery of procedure volumes in China as the impact of COVID-19 has lessened, coupled with healthy growth in the U.S. market, Q4 da Vinci procedures grew by 21%, enabling FY23 procedure volume growth to come in at approximately 22%, the high end of ISRG's 21-22% guidance range.

The improved Q4 outlook should help ease concerns that new weight-loss drugs are going to materially impact procedure volume growth. During the Q3 earnings call, ISRG acknowledged that bariatrics procedures in the U.S. have slowed a little due to the launch of new weight-loss treatments, but these procedures only account for approximately 4-5% of ISRG's total global procedures.
In the wake of the pandemic, people who put off procedures are now returning to the hospital to take care of those delayed treatments. This is a scenario that major health insurance companies, such as Humana (HUM) and UnitedHealth Group (UNH), have discussed in recent quarters, warning that their medical benefit ratios are rising due to elevated utilization trends.
Another concern that weighed on ISRG during most of 2023 was that high interest rates would cut into demand for its pricey surgical systems. However, the company has expanded its equipment leasing program, easing affordability issues. In Q4, ISRG placed 415 da Vinci surgical systems, good for a 12% yr/yr increase, with about half of those systems placed under operating leases.
The types of procedures that ISRG's da Vinci system can perform is also expanding. General surgery, colon resection, hernia repair, and gynecology are a few common procedures performed by the da Vinci system, but lung biopsies represent a significant area of growth with the recent launch of the Ion endoluminal system.

The main takeaway is that although business isn't necessarily booming for ISRG, it is healthy, and the company appears poised for a solid 2024 as the company expands into newer procedure types and as pent-up demand for elective procedures continues to unwind. Although ISRG is forecasting procedure volume growth to slow to 13-16% for 2024, the company could be taking a conservative approach again with its outlook.

Jefferies Q4 results indicate mixed conditions remain in place for financial sector (JEF)
Investment banking and asset management firm Jefferies (JEF) has the distinction of kicking off earnings season for the financial sector and that remained the case last night as it reported Q4 results that beat expectations. However, JEF's earnings report also shows that conditions remain mixed across business lines with advisory in particular still struggling due to low M&A volume amid a high interest rate environment.

In total, Investment Banking & Capital Markets revenue inched higher by 1% to $1.06 bln, led by a 110% surge in debt underwriting to $129.4 mln and a 21% increase in equity underwriting to $132.2 mln. While those growth rates look impressive, it's important to put them into context. In the year-earlier period, equity underwriting fees plummeted by 70%, while debt underwriting fees collapsed by 72%.
Still, as interest rates stabilized, the equity markets strengthened, paving the way for a more active IPO market in Q4. This bodes well for other financial companies that are set to report earnings in the coming weeks, including Goldman Sachs (GS) and Morgan Stanley (MS), each of which are scheduled to release Q4 results on January 16.
A rebound in the debt and equity underwriting markets helped to offset the persistent weakness in JEF's Advisory business, which saw revenue slide lower by 18% to $312.3 mln. The good news, though, is that JEF believes that the investment banking industry has reached the bottom of this current cycle, adding that "there's a lot of reason to believe that M&A activity will pick up this year from low levels in 2023..."
Should that recovery transpire, JEF would be in a solid position to capitalize. Unlike most of its competitors, JEF has been investing in its talent with its recruiting efforts largely centering on investment banking. Over the past three years, the company has added 182 Investment Banking Managing Directors, either from other firms or through internal promotion.
Meanwhile, JEF's trading business in Q4 was relatively stable with Capital Markets revenue lower by just 2% to $481.3 mln. Thanks to the upswing in the stock market, equity trading fees increased by 9% to $271.5 mln, largely offsetting a decline of 13% in fixed income.

Overall, JEF delivered a solid performance given the challenging conditions and its results indicate that Q4 earnings results for the financial sector probably won't be spectacular, but they may be better than anticipated.