ALL: Kurlak speaks! He is now upbeat about Intel/AMD prospects!
Where was he a few months and $50/share ago????
joey
cbs.marketwatch.com
Internet optimism lifts tech shares
By Stephanie O'Brien, CBS MarketWatch
Last Update: 5:42 PM ET Jan 6, 1999
Also: Tech Report,
Internet Daily
NEW YORK (CBS.MW) -- Most U.S. technology indexes soared to
record highs Wednesday amid optimism for Internet and chip companies.
"There is strength overall in the tech sector," said
Dave Johnsen, a managing director at Chicago
Equity Partners, which manages about $8 billion in
assets. "For the first quarter and beyond, it looks
like a strong 1999."
The Goldman Sachs Internet Index jumped 7.2
percent, and the Amex Internet Index gained 3.7
percent. The Philadelphia Semiconductor Index
rose 3.4 percent, while the Amex Networking
Index gained 2.4 percent and the Goldman Sachs
Hardware Index rose 0.9 percent.
Most of those indexes are now at record levels,
and setting new records on almost a daily basis.
The Philadelphia Semiconductor Index, for
example, closed at 389.44, a jump of 86 percent in
the past three months.
The broader Pacific Stock Exchange Technology Index was up 2.8
percent, while the Morgan Stanley Technology Index rose 3.1 percent.
The CBOE Software Index gained 4.5 percent.
The Nasdaq Composite Index, which contains many technology issues,
surged 69.39 points to 2320.66. The Dow Jones Industrial Average
jumped 233.78 to 9544.97, a new high.
Johnsen said there is an expectation across the board that companies will
meet or beat analysts' expectations.
Jeffrey Pittsburg of Goldis-Pittsburg Institutional Services notes that a
number of forecasts were lowered as 1998 wound down, making it easier
for many companies to meet or exceed those views in the March period.
Pittsburgh added that this lowering of the bar has already been factored
into the market. "I don't think the market is overvalued, I don't think it's
undervalued. I think it's kind of neutral here," he said.
Internet stocks
Internet stocks soared amid optimism for growth in
the industry, propelled by positive comments from
Wall Street. Lehman Brothers analyst Brian Oakes
said "I think these are fund inflows. People are
looking at the Internets as the next growth area,
and they are buying that growth."
In his quarterly update for clients, influential Merrill
Lynch analyst Tom Kurlak said "the surge in
Internet related business activity has been
unprecedented in its rate of acceleration. The
information economy is driving productivity higher,
thereby helping to offset sluggishness in the older
industrial economy." See Internet Stocks
Prospects for growth in the Internet industry should
in turn boost related technology industries, such as
semiconductors.
"Opportunities for growth in semiconductor applications designed to
accommodate the evolution of Internet commerce are expanding." Kurlak
said.
Amazon.com (AMZN) jumped 13 1/2 to 138 -- past what would have
been $400 a share before Tuesday's 3-for-1 split. That level that seemed
laughable just one month ago when CIBC Oppenheimer analyst Henry
Blodget set the new price target
Shares of America Online (AOL) rose 1 5/8 to 148 9/16. AOL's stock
could get a boost from a cable broadband deal, Oakes said, noting that a
cable company such as AtHome (ATHM) has a higher valuation than
AOL.
CS First Boston initiated coverage of Lycos (LCOS) with a "buy" rating.
The stock rose 13 5/8 to 66. Among large Internet stocks: Yahoo!
(YHOO) shares jumped 33 1/8 to 291.Ubid (UBID) climbed 1 3/16 to
121 1/16. EBay (EBAY) surged 59 to 283.
In other news: MindSpring Enterprises, Inc. (MSPG) is buying ICG
Communications, Inc.'s (ICGX) Netcom subsidiary for about $215
million in cash and $30 million in stock. Mindspring soared 8 9/16 to 75
1/8, or about 8.5 percent; ICG was down 3/16 to 22 15/16.
Pittsburg says the smartest way to play Internet stocks right now is to buy
them in groups, beginning with telecommunications-related companies.
Metromedia Fiber Network (MFNX) and AtHome are a couple of
Pittsburg's favorites in that area. And certainly venerable AT&T (T) "is
probably one of the best ways of doing it," he said, "because its the
easiest for most people, and probably the cheapest."
Another cheaper way to profit from the Internet surge is to look at
companies like Federal Express (FDX) and Ryder (R), which stand to
profit from rising e-commerce sales, Pittsburg said.
Semiconductors
Merrill Lynch's Kurlak said that depressed sales and earnings levels in the
fourth-quarter relative to the year-ago period reflect still soft worldwide
industry orders and lower prices for chips due to overcapacity. However,
he said, "the cycle appears to have passed its low point."
A strong seasonal recovery in personal computer sales in the fourth
quarter is extending into the current quarter, Kurlak said, stepping up
demand for PC-related semiconductors. Intel and Advanced Micro
Devices stand to benefit from that increased demand, he said. Still, the
majority of non-PC semiconductor products are not yet recovering.
"We expect 1999 earnings results for the industry overall to be mixed and
we remain mostly neutral toward this industry group. However, growth
continues for communications and networking related chips makers and
for Intel and AMD as PC demand is accelerated by the Internet," said
Kurlak.
Kurlak said he favors communications-geared names including PMC
Sierra (PMCS) Vitesse Semiconductor (VTSS) and Broadcom (BRCM),
We expect comments regarding the 1999 outlook from all three
companies to be very positive. PMC Sierra rose 5 7/8 to 69 1/8; Vitesse
rose 5 15/16 to 50 1/8 and Broadcom rose 25 1/2 to 158 3/8.
In a CNBC interview Wednesday morning, Lam Research (LRCX)
CEO James Bagley was upbeat about the profit outlook for the
semiconductor industry for the first half of 1999.
"The business will be better in the first quarter than in the September or
December quarters," Bagley said. Bagley pointed to increases in capital
spending by chip giants Samsung and Hyundai as indications of a
potentially "substantial growth" and said he sees semiconductor usage
accelerating.
Lam shares rose 1 7/8 to 27 1/8. Among others: Intel (INTC) rose 6 1/4
to 129 1/2. Advanced Micro Devices (AMD) was off 7/16 to 27 1/4.
Among the equipment makers, KLA-Tencor (KLAC) gained 1 7/16 to
54 1/16.Teradyne (TER) gained 3 3/8 to 49.
Networking stocks
Among networking stocks, Cabletron Systems (CS) was up 1 to 10, or
19 percent. FORE Systems (FORE) rose 7/8 to 19 7/8.
Ascend Communications (ASND) gained 3/4 to 69 13/16. Cisco
Systems (CSCO) rose 2 13/16 to 99 3/4, Novell (NOVL) added 1 3/16
to 19 3/4 and 3Com (COMS) rose 5/16 to 47 7/16. Newbridge
Networks (NN), meanwhile, was down 1 to 33.
Software
Shares in Informix Corp. (IFMX) jumped after the database software
maker spoke at a Morgan Stanley investment conference. The
presentation comes one day after Informix named Howard Bain as new
chief financial officer. The stock rose 1 1/4 to 12 1/2. See StockWatch
and Software Report.
On the downside, Hyperion Solutions said its fiscal second-quarter results
will fall short of analysts' expectations. The company (HYSL) also said in
a press release that results in the next quarter will also lag projections as it
smoothes out salesforce problems. See Software Report. The stock
added 1/8 to 17 1/2.
Goldman Sachs analyst Rick Sherlund lowered fiscal 1999 and 2000
revenue and earnings estimates for Hyperion Solutions. He maintained his
"market outperformer" rating on the stock. Earlier this week, the software
company said its fiscal second-quarter earnings would fall short of Street
expectations.
Among other software issues, while Microsoft's stock (MSFT) gained 4
3/4 to 151 1/4. Oracle's (ORCL) rose 2 1/16 to 46 3/8.
Hardware
Among hardware makers, International Business Machines (IBM) fell 7/8
to 188 3/4, Sun Microsystems (SUNW) was off 1 5/8 to 90 15/16, Dell
(DELL) gained 2 7/8 to 78 1/8, Gateway (GTW) slipped 1 11/16 to 56
5/16 and Compaq Computer (CPQ) was up 7/16 to 44 7/16.
Apple Computer (AAPL), meanwhile, was down 1 9/16 to 41 3/4.
Hewlett-Packard (HWP) rose 1 15/16 to 71 5/8.
In a note to clients, Merrill Lynch analyst Steven Milunovich said he
expects revenue to be "on plan" though earnings momentum isn't strong
until the second half. He expects revenue to rise 5 percent, driven by
healthy demand in the Americas and Europe, though Asia remains weak.
Demand for printers is strong, Milunovich said. "It appears that the
company is on track for our 82 cents versus 86 cents estimate with some
chance for upside. Top-line growth of 4 percent to 5 percent looks
reasonable, he also said.
Stephanie O'Brien is a reporter for CBS MarketWatch. |
