Updated for 09-Nov-98
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General Commentary
Briefing will be providing live coverage of the AEA Technology Conference over the next few days... See Stock Briefs on
Tuesday, Wednesday and Thursday for more.
Dell Computer heads small list of tech companies due to report earnings this week... Company due to report on
Thursday... Other companies on this week's schedule include CompUSA (CPU-T), DIGI International (DGII-Th)
and International Fibercom (IFCI-Th) and Kulicke & Soffa (KLIC-F)... For a complete list of companies due to
release results this week/month, see Briefing's Earnings Calendar.
Techs have provided much of the fuel to the recovery rally, with Chip, Chip Equipment, Internet, Disk-drive/storage and
Telecom Equipment stocks among the biggest winners... Momentum and better than feared earnings behind the sector's
resurgence... End of year portfolio adjustments also contributing to rebound... Though there is still decent value in the
second and third tier names, many of the sector leaders are trading back at valuation levels which give us pause considering
the still uncertain global economic outlook... Slowing top line growth also a concern.
Industry Briefs
Computer Systems & Peripherals | Networking | Software | Internet | Semiconductor | Chip Equipment | Telecom Equipment
Computer Systems & Peripherals
Dell Computer (DELL)... As noted above company due to release quarterly results on Thursday... Consensus estimate
calls for gain of $0.27 v. $0.18 a year ago... Based on recent history, however, street will be looking for gain of $0.30+...
Focus will also be on ASP (average selling price)... Dell has also been making, and living up to, bold forward looking
comments... Any sign of caution now would be red flag... But early this week, expectations of a strong number should drive
stock to and through its 52-wk high of 69 1/4.
Hutchinson (HTCH) surged over 2 points on Friday bringing resurgent disk-drive related company to within striking
distance of its 52-wk high at 32 3/4...Narrower than expected loss, a pick up in sales and positive forward looking comments
propelled stock sharply higher last week... However, stock has staged a near vertical climb off its late summer lows and is
grossly overextended from a short-term technical perspective... Don't be surprised if stock gives a little ground this week...
Support is at 25.
Sun Microsystems (SUNW) ended last week trading a new all-time high... Fundamentally, stock continues to deliver
strong top and bottom line growth... Technically, rally over past few weeks has created a near-term overbought condition...
Doesn 't mean stock will turn around on a dime, but near-term risk/reward ratio now neutral to slightly bearish... Corrective
support is at 55.
Computer Networking
Group remains relatively quiet... Not even Cisco's (CSCO) solid earnings report could give networkers much life... In
fact, CSCO failed to follow through on Thursday's post-earnings related pop, shedding 3/8 on Friday.
Two second tier names making noise, however, are Newbridge Networks (NN) and Xylan (XYLN)... Former broke
out of a bearish trend last week and is well positioned to extend advance to the 28-30 range over the next 9- to 12-months...
Latter firm, penetrated minor resistance on Friday... Next stop 21-22 area.
Computer Software & Services
Microsoft slugging it out in drawn out legal conflict with DOJ... Despite legal uncertainties stock regaining momentum...
Strong sales heading into holiday season bodes well for the quarter... Stock just 10 points from new all-time high... As long
as market tone remains bullish, look for software giant to test this ceiling this week or next.
Netscape (NSCP)... Not a lot of news, but stock quietly staging impressive recovery... Friday's gains lifted stock above
resistance at 25, positioning stock for near- to intermediate-term test of 30.
Baan (BAANF) jumped nearly 10% on Friday, extending its recovery rally... Was hit hard by poor earnings, accounting
concerns, and tax-related selling... Stock has plenty of room for further intermediate-term gains... Next resistance in the
17-18 area.
Internet
We noted prior to Friday's open that Earthlink (ELNK) was approaching top of 7-mo trading range... Well stock easily
broke through this ceiling and marched convincingly to new all-time high on big jump in volume... Break out positions stock
for move to the 55-60 range... At roughly 10x TTM sales stock also relatively inexpensive (as far as net companies are
concerned).
Verisign's (VRSN) jump on Friday was impressive not for its scope (though no one can squabble with a 5% gain) but
because the gain occurred on more than 7x average daily volume... Big gains, big volume is a good combination... Look for
additional upticks to the 45 area over next few months.
Inktomi (INKT) one of those stock's that defies gravity... Despite outrageous valuations (by an measure) stock added
another 15 1/2 points, or 17.3%, on Friday... Don't know when momentum investors will bail, but when they do stock will
get hit hard as it could shed 30% and still be way overpriced.
Amazon (AMZN) one of few net stocks to end last week with a loss, fell more than 3 points Friday on news that
competitor Barnes & Noble (BKS) acquired the world's largest book distributor, Ingram Industries, for $600 mln... Briefing
expects stock to continue exhibiting a bearish bias over next few months, as lousy earnings picture doesn't support recent
rebound.
Semiconductor
Group upgraded by Briefing on Friday... See Sector Ratings for details.
As noted on our Events Calendar, Intel to hold analyst conference on Friday... Based on better than expected earnings last
quarter, bullish forward looking commentary and evidence of strong PC demand, street will be expecting good news...
Stock's break above key resistance (91) last week indicative of bullish mood on street.
Semiconductor Equipment
After spending a couple of sessions consolidating, chip equipment stock regained their winning form on Friday with
Applied Materials (AMAT), Etec Systems (ETEC), KLA-Tencor (KLAC), Novellus (NVLS) and Teradyne
(TER) pacing the advance...
Applied Materials up on news of breakthrough low K Dielectric film for high speed copper chips... Stock poised for
assault on 52-wk high of 39 9/16.
Morgan Stanley Dean Witter downgrades Etec Systems from strong buy to outperform, citing weaker than expected
bookings.
Kulicke & Soffa (KLIC) due to report results on Friday... Street looking for loss of $0.53 against year ago gain of
$0.63... Bad news already discounted, so as long as company doesn't make bearish forward comments, stock likely to keep
trending higher... Next resistance is at 18 1/2, with penetration targeting return to 25.
Telecommunications Equipment
Lucent (LU) won another multimillion dollar contract, as company will supply Singapore's StarHub with optical
transmission and access equipment... Next resistance is in 95-96 range.
Digi International (DIGI) due to report results on Thursday... Consensus estimate calls for gain of $0.14 v. year ago
profits of $0.10... Stock nearing key resistance at 15 1/2... Earnings news could prove catalyst for break out... Next
resistance is in the 18-20 zone.
Another small telecom equipment company, International Fibercom (IFCI) to report on Thursday... Company expected
to post gain of $0.12, well above year ago profit of $0.03... Stock has been marching steadily higher over past few weeks
and is within a whisker of 52-wk high at 9 9/16... Penetration of this ceiling on good volume would leave stock positioned
for intermediate-term test of 12-13 area. |
