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After The Fall: Value & Upside In Chip Stocks As Summer Heat Awaits (INTC, QCOM, BRCM, NVDA, AMD, TSM, MU, FSL, SNDK, AMAT, ALTR, LRCX, SMH, XSD, USD)

Administrator — Thu, 24 May 2012 15:51:47 +0000

The recent sell-off has been brutal to semiconductors and chip stocks of late. To make matters worse, investing in technology and semiconductors can be brutal during the summer months. Still, many investors believe that where there is risk there is also reward and trying to nail an exact bottom is no easy task.

With warnings having started from key leaders in the realm of chip stocks, the question is whether or not you can trust the analysts and the consensus upside. 24/7 Wall St. has gone in and evaluated the leaders in each aspect of the semiconductor sector to see where there is value and where the risks currently lie. We evaluated the following chip companies: Intel Corporation (NASDAQ: INTC); QUALCOMM Incorporated (NASDAQ: QCOM); Texas Instruments Inc. (NASDAQ: TXN); Broadcom Corp. (NASDAQ: BRCM); NVIDIA Corporation (NASDAQ: NVDA); Advanced Micro Devices, Inc. (NYSE: AMD); Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM); Freescale Semiconductor Holdings (NYSE: FSL); SanDisk Corporation (NASDAQ: SNDK); Applied Materials Inc. (NASDAQ: AMAT); Lam Research Corporation (NASDAQ: LRCX); and Altera Corporation (NASDAQ: ALTR).

In a further effort to show just how much these have sold off, we have shown the moves in the following key semiconductor ETFs: Market Vectors Semiconductor ETF (AMEX: SMH); SPDR S&P Semiconductor (AMEX: XSD); and the ProShares Ultra Semiconductors (AMEX: USD). We have also run the same screens in retail, gold and silver miners, conglomerates, industrial giants, and major oil companies with links to those at the end of this article. Here is the screening of value and upside in the chip giants:

Intel Corporation (NASDAQ: INTC) traded at $26.60 with a market value of $129 billion. The consensus target price for the king of PC processors from Thomson Reuters is $29.75 and the 52-week trading range is $19.16 to $29.27. This DJIA component’s most recent yield was listed as 3.2%. Intel’s implied upside to the consensus target is 16% and it is worth noting that the consensus target is just above the 52-week high.

QUALCOMM Incorporated (NASDAQ: QCOM) traded at $57.78 with a market value of $99 billion. The consensus target price from Thomson Reuters is $71.92 and the 52-week trading range is $45.98 to $68.87. The CDMA giant yields about 1.7% after dividend hikes. The implied upside to the consensus target is just under 25% but we would note that the consensus target is still over $3.00 above the 52-week high.

Texas Instruments Inc. (NASDAQ: TXN) traded at $29.15 with a market value of $33.4 billion. The consensus target price from Thomson Reuters is $35.80 and the 52-week trading range is $24.34 to $35.30. The yield here is about 2.3%. TI’s implied upside to the consensus target is just under 23% and that target is still just above its 52-week high.

Broadcom Corp. (NASDAQ: BRCM) traded at $31.85 with a market value of $17.5 billion. The consensus target price from Thomson Reuters is $43.21 and the 52-week trading range is $27.59 to $39.66. Broadcom has a paltry yield of only about 1.2%, but its implied upside to the consensus target is about 35%. Be advised that this consensus target is almost $4.00 above the 52-week high.

NVIDIA Corporation (NASDAQ: NVDA) trades at $12.25 and its market cap is just over $7.5 billion. This graphics processor leader has a consensus target price of $16.64 and the 52-week trading range is $11.47 to $20.05. NVIDIA pays no dividend and that is something which it should consider changing since it has about $3 billion in cash and liquidity. Its implied upside to the consensus target is about 35% and that consensus target price is well under its 52-week high.

Advanced Micro Devices, Inc. (NYSE: AMD) trades at $6.06 and its market cap is only $4.25 billion despite it being so actively traded. The consensus target price for this distant number-2 in PC processors is $8.55 and the 52-week trading range is $4.31 to $8.71. AMD has no dividend due to very spotty earnings. Its implied upside to the consensus target is more than 41% if you trust the analysts here and its target price is just under its 52-week high.

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) currently trades at $14.15 for its ADR and Yahoo! Finance shows its market value being about $73 billion. The consensus target price from Thomson Reuters is $16.70 and the 52-week trading range is $10.75 to $16.15. The yield is listed as roughly 2.9%. TSM’s implied upside to the consensus target is 18% and the consensus target is about 4% above the 52-week high.

Freescale Semiconductor Holdings (NYSE: FSL) has been battered since its IPO and shares now trade at $9.75 with an implied market value of $2.4 billion. This private equity backed chip outfit’s consensus target price from Thomson Reuters is all the way up at $17.92 and the 52-week (less than one-year actually) trading range is $9.43 to $20.97. Freescale has NO DIVIDEND, which makes it stand out against the peer group now. Still, if you trust the analysts here the implied upside to the consensus target is a whopping 83%! Trust is hard to come by here, particularly for a company where backers will sell shares along the way into strength.

SanDisk Corporation (NASDAQ: SNDK) trades around $32.50 and its market value is about $7.9 billion. The king of flash memory’s consensus target price from Thomson Reuters is $44.46 and the 52-week trading range is $31.34 to $53.46. SanDisk has no current dividend, something which may need to change down the road considering that this is not anywhere close to a new company. Its implied upside to the consensus target is 37% but the company has had two warnings.

Applied Materials Inc. (NASDAQ: AMAT) currently trades at $10.55 and its market value is $13.6 billion. The consensus target price from Thomson Reuters is $13.65 and the 52-week trading range is $9.70 to $13.94. Applied now yields about 3.4% and its implied upside to the consensus target is about 29%.

Lam Research Corporation (NASDAQ: LRCX) is worth more than $4.5 billion today but it is acquiring Novellus Systems, Inc. (NASDAQ: NVLS) for about $3 billion in stock, so it will soon be larger. Its shares trade at $38.00, its consensus target price is $48.53 and the 52-week trading range is $34.81 to $48.88. Lam Research pays NO DIVIDEND now and its implied upside is almost 28%.

Altera Corporation (NASDAQ: ALTR) currently trades at $33.90 and its market value is $10.9 billion. The consensus target price from Thomson Reuters is $41.00 and the 52-week trading range is $30.39 to $48.91. Altera has a dink yield of only about 1% and we expect a dividend hike in the coming weeks or months. Its implied upside to the consensus target is about 21% and this one is well off highs and the target is almost $8.00 under its 52-week high.

Market Vectors Semiconductor ETF (AMEX: SMH) has undergone a total transformation since it is no longer the Semiconductor HOLDRs. At $31.25 its range since the change is listed as $28.86 to $36.17. This ETF is said to have assets of almost $400 million, but that changes based upon inflows and outflows on top of the change in the price.

SPDR S&P Semiconductor (AMEX: XSD) ETS is now one of the longest ETF in chips since the HOLDRS changed. At $43.50 now, its 52-week range is $40.09 to $59.85 and it still has only about $44 million in assets. This one peaked in January and the mix of components has made it more volatile than many leaders. This ETF would now have to rally by more than 37% to hit its 52-week high again.

ProShares Ultra Semiconductors (AMEX: USD) uses leverage of 2-times for its semiconductor trading, so this is one where it will feel just like getting your fingernails ripped out when your timing is wrong. At $33.50, this leveraged ETF has a 52-week range of $26.18 to $46.46. It would have to rally about 39% to hit its 52-week high again.

As you can see, the semiconductor and chip leaders have now pulled back substantially from their highs seen throughout 2012. The issue to consider is that Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Co. (NYSE: HPQ) have confirmed that PC sales are slowing. Some of this is due to Apple Inc. (NASDAQ: AAPL) and some of it is due to weakness in Europe, weak PC spending in the Americas, and a slowing of growth in the BRIC nations. How the Microsoft Corporation (NASDAQ: MSFT) launch of Windows 8 will impact the PC refresh cycle ahead is now another wild card since PC sales guidance is looking softer than anticipated from just a couple of weeks ago.

We also want to warn investors to not just blindly trust the analysts in semiconductor price targets here. Summer can be a brutal time for chip stocks. The drop in the ProShares Ultra Semiconductors (AMEX: USD) during the summer of 2011 was about 40% and the drop from the 52-week high in 2011 to that end of summer trough was almost 50%.

The drop in the SPDR S&P Semiconductor ETF (AMEX: XSD) during the summer of 2011 was about 25%, but the drop from the peak in early 2011 here to the trough of late-summer was about 31%.

Summer is a very tough time to invest in chip stocks, and the question now is just how much the slowdown is going to continue taking out of chip stocks. We would certainly avoid trying to play the game of trying to catch falling knives here, but these are all worth keeping an eye on for those inflection points where the valuations start to adequately discount the warning signs.

Gold & Silver Miners with the Most Upside Value

Major Oil Companies with the Most Upside Value

Industrials with the Most Upside Value

Conglomerates with the Most Upside Value

Retail Stocks with Upside

JON C. OGG

Filed under: Consumer Electronics, Dividend, PC Companies, Semiconductor, Technology Companies, Value Investing Tagged: ALTR, AMAT, AMD, BRCM, DELL, FSL, HPQ, INTC, LRCX, MU, NVDA, QCOM, SMH, SNDK, TSM, USD, XSD

Top Analyst Upgrades & Downgrades (ADI, ARMH, AGO, BHI, DF, DELL, DUK, EV, EXPR, HPQ, HGSI, IRDM, MET, NOV, OCZ, RSH, RA)

Administrator — Thu, 24 May 2012 12:18:24 +0000

These are some of the top analyst upgrades, downgrades and initiations seen in Wall Street research calls this Thursday.

Analog Devices Inc. (NYSE: ADI) Reiterated Buy with $43 target at Argus.

ARM Holdings PLC (NASDAQ: ARMH) Raised to Buy at S&P.

Assured Guaranty (NYSE: AGO) Raised to Buy at UBS.

Baker Hughes Inc. (NYSE: BHI) Cut to Hold at Societe Generale.

Dean Foods Co. (NYSE: DF) named as Bull of the Day in its turnaround at Zacks.

Dell Inc. (NASDAQ: DELL) Maintained Buy but target cut to $18 from $22 at Argus.

Duke Energy Corporation (NYSE: DUK) Raised to Buy at UBS.

Eaton Vance (NYSE: EV) Raised to Neutral from Sell at Citigroup.

Express Inc. (NYSE: EXPR) Started as Neutral at JPMorgan.

Hewlett-Packard Co. (NYSE: HPQ) Maintained Neutral but raised 2012/2013 estimates by 2% at Credit Suisse.

Human Genome Sciences Inc. (NASDAQ: HGSI) Cut to Market Perform with a price target of $13.00 at BMO Capital.

Iridium Communications Inc. (NASDAQ: IRDM) Started as Buy at CRT Capital.

MetLife Inc. (NYSE: MET) Reiterated Buy with $46 target at Argus.

National Oilwell Varco (NYSE: NOV) Raised to Buy at Societe Generale.

OCZ Technology Group Inc (NYSE: OCZ) Started as Outperform with $8 target at Credit Suisse.

RadioShack Corporation (NYSE: RSH) named as Bear of the Day at Zacks.

RailAmerica Inc. (NYSE: RA) Cut to Neutral at JPMorgan.

Three calls seen on NetApp (see here).

If you enjoyed the top analyst upgrades and downgrades, you can join our free email newsletter that includes analyst summaries each morning sent right to your inbox. We also cover top issues such as IPOs, special financial exclusives, mergers and more. Sign up in the box below.

JON C. OGG

Filed under: Analyst Calls Tagged: ADI, AGO, ARMH, BHI, DELL, DF, DUK, EV, EXPR, HGSI, HPQ, IRDM, MET, NOV, OCZ, RA, RSH

H-P Escapes Dell’s Executioner… But Its Workforce Doesn’t

Administrator — Wed, 23 May 2012 20:52:56 +0000

Hewlett-Packard Company (NYSE: HPQ) is managing to escape the trap of Dell Inc. (NASDAQ: DELL) after earnings. Unfortunately, at least if you are a worker there, a decent portion of H-P’s rise after earnings may be tied to its announcement of a restructuring that is going to shed somewhere around 27,000 workers or about 8% of its workforce.

On an adjusted basis H-P turned in earnings of $0.98 EPS on total sales of $30.69 billion. This was above its prior guidance of $0.88 to $0.91 per share and above the consensus from Thomson Reuters of $0.91 EPS and $29.9 billion in revenues.

HP showed the following in PC and tech sales:

Personal Systems Group revenue was flat year over year with a 5.5% operating margin.
Commercial revenue increased 3%
Consumer revenue declined 4%
Workstations revenue was down 1%
Desktop units were up 5%
notebook units were down 6%
total units were down 1%.

Results elsewhere are as follows:

Services revenue declined 1% year over year with an 11.3% operating margin
Imaging and Printing Group (IPG) revenue declined 10% year over year with a 13.2% operating margin.
Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year with an 11.2% operating margin.
HP Financial Services revenue grew 9% year over year driven by a 4% increase in net portfolio assets and a 5% increase in financing volume.
Software revenue grew 22% year over year with a 17.7% operating margin, including the results of Autonomy… but it noted “Autonomy saw a significant decline in license revenue.”

HP spent $350 million of cash during the quarter to repurchase approximately 13 million shares of common stock in open market transactions and the company exited the quarter with $8.7 billion in gross cash.

Cutting another 8% of the workforce in the coming year or more is not going to come without pain. What is also helping is that the crummy news coming out of Dell caused Dell’s worst day in a decade or more and that set the bar very low for H-P. H-P closed down 3.2% at $21.08 against a prior 52-week low of $21.28, but shares are up 5.7% at $22.33 in the after-hours session.

Microsoft Corporation (NASDAQ: MSFT) is not winning with H-P perhaps on lower total unit sales. Shares closed down 2.2% at $29.11 and the stock is at $29.04 in the after-hours. Intel Corporation (NASDAQ: INTC) is facing the same after a 2.3% drop to $25.44 today and the after-hours session is down at $25.35.

JON C. OGG

Filed under: Earnings, Economy, PC Companies, Software, Technology Companies Tagged: DELL, featured, HPQ, INTC, MSFT

24/7 Wall St. Closing Bell — May 23, 2012 (FB, PCX, BX, AMAT, DELL, AEO, BIG, HRL, STP, TSL, FRED, HNZ, MMYT, TIF, TD, COST, PETM, STX)

Paul Ausick — Wed, 23 May 2012 20:05:55 +0000

The three major US stock indexes opened lower this morning after European leaders disagree on a fiscal response to the continent’s debt crisis(our coverage here). New US home sales were slightly above the consensus estimate, but made little difference in the slide. As the day wore on, more bad news from Europe sent crude oil prices tumbling and the dollar rising in the currency markets (our coverage here). The US dollar index rose today, now up 0.76% at 82.115. The GSCI commodity index is down fractionally at 628.23, with commodities mostly lower on the stronger dollar. Orange juice, cocoa, and cotton were today’s big losers. WTI crude oil closed down -2.1% at $89.90/barrel, its lowest settlement since October, and Brent crude trades down -2.51% at $105.69/barrel. Natural gas rose just 0.52% today to $2.72/thousand cubic feet. Gold settled down -1.8% today, at $1,548.40/ounce.

The unofficial closing bells put the DJIA down nearly 7 points to 12,496.07 (-0.05%), the NASDAQ rose about 11 points (0.39%) to 2,850.12, and the S&P 500 rose 0.17% or about 2 points to 1,318.85.

There were several analyst upgrades and downgrades today, including Facebook Inc. (NASDAQ: FB) started as ‘buy’ with a target price of $40 at Needham (more coverage here); Patriot Coal Corp. (NYSE: PCX) cut to ‘hold’ at Deutsche Bank; The Blackstone Group LP (NYSE: BX) raised ‘buy’ at Sterne Agee; Applied Materials Inc. (NASDAQ: AMAT) raised to ‘neutral’ at Goldman Sachs; and Dell Inc. (NASDAQ: DELL) cut to ‘neutral’ at Mizuho and maintained as ‘underperform’ with a $14 target price at Credit Suisse.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Dell is down -16.8% at $12.55 after posting a new 52-week low of $12.31 earlier today (more coverage here); American Eagle Outfitters Inc. (NYSE: AEO) is up 1.4% at $20.07; Big Lots Inc. (NYSE: BIG) is up 4% at $36.20; Hormel Foods Corp. (NYSE: HRL) is up 1.2% at $29.54; Suntech Power Holdings Co. Ltd. (NYSE: STP) is up 1.5% at $2.01 (more coverage here); and Trina Solar Ltd. (NYSE: TSL) is up 4.9% at $5.59.

Tomorrow we are scheduled to get earnings reports from Fred’s Inc. (NASDAQ: FRED), H.J. Heinz Co. (NYSE: HNZ), MakeMyTrip Ltd. (NASDAQ: MMYT), Tiffany & Co. (NYSE: TIF), The Toronto-Dominion Bank (NYSE: TD), and Costco Wholesale Corp. (NASDAQ: COST).

Other standouts from today include the following stocks:

PetSmart Inc. (NASDAQ: PETM) is up 13.3% at $62.99 after posting a new 52-week high of $63.19 earlier today. The company reported better-than-expected earnings and forecast more good things to come.

Seagate Technology PLC (NASDAQ: STX) is down -2.4% at $25.72. The disk drive maker is buying France-based LaCie SA for $186 million.

Stay tuned for Thursday. New York Fed President William Dudley is giving a speech. We have also noted the following events on the schedule (all times Eastern):

8:30 a.m. – Durable goods orders
8:30 a.m. – New claims for unemployment benefits
10:30 a.m. – EIA weekly natural gas storage report
11:00 a.m. – Kansas City Fed manufacturing index
1:00 p.m. – 7-year note auction
4:30 p.m. – Fed balance sheet and money supply

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AEO, AMAT, BIG, BX, COST, DELL, FB, FRED, HNZ, HRL, MMYT, PCX, PETM, STP, STX, TD, TIF, TSL

Dell Plays Wrecking Ball For Entire PC Food Chain (DELL, INTC, MSFT, HPQ, STX, WDC, MU)

Administrator — Wed, 23 May 2012 15:19:19 +0000

Dell Inc. (NASDAQ: DELL) was nothing short of a really bad earnings report. The wart on the nose is a declining margin, declining earnings power, and less and less revenue growth. With only 2% to 4% expected in sequential revenue growth, now the question comes up about accurate Intel Corporation (NASDAQ: INTC) was on its reiterated guidance recently and also about how accurate all of the predictions are in the coming Windows refresh cycle for Microsoft Corporation (NASDAQ: MSFT) and the coming launch of Windows 8.

When you see a drop of 17% on Dell, you might expect that the volume was 100 million shares or so. As of 11 AM EST we have still not even seen 40 million shares trade against an average volume of 16.5 million. The volume is strong, but this feels like the sort of news that would drive 100 million shares. That being said, Dell traded 51,440,000 shares per NASDAQ trading data on its last earnings report day-after.

Hewlett-Packard Co. (NYSE: HPQ) is set to report earnings today after the close of trading and estimates are $0.91 EPS and $29.92 billion in sales. Let’s just say that it is safe to assume that the estimates have unofficially come down significantly. H-P shares are down 4.6% at $20.77 and this is a new 52-week low. As a reminder, HP is expected to announce a major round of tech layoffs today as part of its restructuring.

This appears to be the worst trading day in more than a decade for Dell on a percentage drop. Dell is down 17.1% at $12.50 now and the prior 52-week range is $13.29 to $18.36. Dell is now probably under 6-times forward earnings estimates after the drop and H-P is roughly the same. The problem is that no one is willing to pay for contracting earnings power of this sort. Dell offers no dividend to entice shareholders to stay around, and HP offers at least a yield of about 2.2% based on today’s price.

Intel Corporation (NASDAQ: INTC) is down 3.2% at $25.19 and Microsoft Corporation (NASDAQ: MSFT) is down 2.9% at $28.90.

Elsewhere in key PC components, the fallout continues… Seagate Technology PLC (NYSE: STX) is down 2% at $25.81 against a recent high of $32.55 and Western Digital Corp. (NYSE: WDC) is down 2% at $33.82 against a recent high of $44.44. We warned investors not to chase those on the last round of good news as it should have been anticipated at the end of 2011 and in the first quarter of this year. It may seem a bit of a surprise, but the US king of DRAM via Micron Technology Inc. (NASDAQ: MU) is down only 0.2% at $5.70 because it is already down so much from the highs of $10.23 over the last year.

It goes without saying… wrecking balls swing back and forth, and the damage is severe. Dell has become technology’s wrecking ball and having a ”LOW P/E VALUATION” is about as relevant as gold to a dead man today.

JON C. OGG

Filed under: Consumer Electronics, Earnings Warning, PC Companies, Software, Technology Companies Tagged: DELL, HPQ, INTC, MSFT, MU, STX, WDC

Top Analyst Upgrades & Downgrades (AMAT, ARBA, BX, CPLA, CHA, DELL, DNDN, EMC, FB, GMT, ICE, JAZZ, NDAQ, PCX, PG, SBUX, WY)

Administrator — Wed, 23 May 2012 12:22:37 +0000

These are some of the top analyst upgrades, downgrades and initiations seen in Wall Street research calls this Wednesday.

Applied Materials Inc. (NASDAQ: AMAT) Raised to Neutral at Goldman Sachs.

Ariba Inc. (NASDAQ: ARBA) Cut to Neutral at Goldman Sachs.

The Blackstone Group LP (NYSE: BX) Raised to Buy at Stern Agee.

Capella Education Co. (NASDAQ: CPLA) named Bear of the Day at Zacks.

China Telecom (NYSE: CHA) Raised to Outperform at Credit Suisse.

Dell Inc. (NASDAQ: DELL) Cut to Neutral at Mizuho; Maintained Underperform and target cut to $14 at Credit Suisse.

Dendreon Corporation (NASDAQ: DNDN) Started as Underperform at Jefferies; Maintained Hold with $11 target at Canaccord Genuity.

EMC Corp. (NYSE: EMC) Reiterated Buy with $36 target at Argus.

Facebook, Inc. (NASDAQ: FB) Started as Buy with $40 target at Needham.

GATX Corporation (NYSE: GMT) named Bull of the Day at Zacks.

IntercontinentalExchange, Inc. (NYSE: ICE) Raised to Buy at Deutsche Bank.

Jazz Pharmaceuticals (NASDAQ: JAZZ) Started as Outperform at Credit Suisse.

NASDAQ OMX Group (NASDAQ: NDAQ) Cut to Hold at Deutsche Bank.

Patriot Coal (NYSE: PCX) Cut to Hold at Deutsche Bank.

Procter & Gamble Co. (NYSE: PG) Reiterated Buy with $70 target at Argus.

Starbucks Corporation (NASDAQ: SBUX) Raised to Buy at BofA/ML.

Weyerhaeuser Co. (NYSE: WY) Started as Buy at Goldman Sachs.

JON C. OGG

Filed under: Analyst Calls Tagged: AMAT, ARBA, BX, CHA, CPLA, DELL, DNDN, EMC, FB, GMT, ICE, JAZZ, NDAQ, PCX, PG, SBUX, WY

As Results Fall, How Does Michael Dell Keep His Job?

247wallst — Wed, 23 May 2012 10:32:29 +0000

There are a number of differences between Dell (NASDAQ: DELL) founder and CEO Michael Dell and Facebook (NASDAQ: FB) CEO Mark Zuckerberg. Among them is that Zuckerberg holds shares that allow him to control his board and the firm’s decisions absolutely. Michael Dell only owns 13% of the shares in the firm he started. The difference allows the Dell board to fire Michael Dell, and it is time it should. Dell’s results showed, once again, that the company has failed to bring itself into the post-PC age, and the numbers show no sign that will happen anytime soon.

Dell blamed “alternative mobile computing devices” for its poor earnings and poorer forecast. Dell reported a 4% fall in revenue to $14.4 billion, as well as a profit of $0.43 a share. The consensus forecast among analysts who follow Dell was $14.9 billion in revenue and $0.46 a share in profit. Results for the company’s notebook operations were particularly weak. After the announcement, Dell’s shares fell like a stone.

Dell has had the tools to enter the tablet PC and smartphone businesses. The company still makes money and has almost $14 billion in cash. Its enterprise server sales remain healthy. Dell has no excuse for allowing the cutting edge of computing to pass it by.

It is reasonable to blame Michael Dell because he has controlled the company since the start. He could not possibly have missed the surge in the sales of smartphones by Apple (NASDAQ: AAPL), and later Google (NASDAQ: GOOG) Android-powered devices, or the iPad. Dell has not made a substantial push into either market. The risks would have been big, both in terms of investment and reputation. Yet, it was a risk worth taking, based solely on the alternative, which was to be left behind.

It is already too late for Dell to enter the rapidly emerging markets of smartphones and tablets. The market shares of Apple, Amazon.com (NASDAQ: AMZN) and Samsung are already too large. Another dozen companies are fighting for the tiny amount of business that remains.

Fixing Dell may be a long shot, but it certainly has no chance to happen with Michael Dell as its CEO.

Douglas A. McIntyre

Filed under: Earnings Warning, Management Change Tagged: AAPL, AMZN, DELL, FB, featured, GOOG

Media Digest (5/23/2012) Reuters, WSJ, FT, Bloomberg

247wallst — Wed, 23 May 2012 10:31:38 +0000

Merkel and Hollande will fight over stimulus for the eurozone at the EU summit. (Reuters)

The OECD expresses concerns that Europe could slip into a deep recession. (Reuters)

The EU debt crisis pushes global shares lower. (Reuters)

Morgan Stanley (NYSE: MS) cuts its Facebook (NASDAQ: FB) ratings just before the IPO. (Reuters)

Sony (NYSE: SNE) and Samsung try to get retailers to discount their TVs less. (WSJ)

AOL’s (NYSE: AOL) Patch local website project continues to draw the ire of investors. (WSJ)

The Congressional Budget Office says that gridlock in DC could cause a recession in 2013. (WSJ)

SAP (NYSE: SAP) will buy Ariba (NASDAQ: ARBA) for $4.3 billion. (WSJ)

South Korea will continue to import oil from Iran despite U.S. and EU sanctions over the Iran weapon’s program. (WSJ)

The International Monetary Fund says the UK needs to create stimulus programs. (WSJ)

Dell’s (NASDAQ: DELL) earnings are hurt as it attempts to move beyond PCs as its major line of sales. (WSJ)

Ford’s (NYSE: F) credit rating is upgraded from “junk” status. (WSJ)

CalSTRS, the second-largest U.S. public pension fund, will vote against Walmart (NYSE: WMT) directors in the wake of a bribery scandal. (FT)

EU banks would be damaged if Greece leaves the eurozone, as they have almost $1.2 trillion in debt from Spain, Portugal, Italy and Ireland. (FT)

Mazda and Fiat to build a sports car. (Bloomberg)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AOL, ARBA, DELL, F, FB, MS, SAP, SNE, WMT

Full 360-Degree Dell Earnings Preview

Administrator — Tue, 22 May 2012 16:57:18 +0000

Dell Inc. (NASDAQ: DELL) is set to report earnings after the close, one day before rival Hewlett-Packard Co. (NYSE: HPQ) reports earnings. Dell is expected to report earnings of $0.46 EPS (down from $0.55 a year ago) on a 0.7% sales drop of $14.91 billion in revenue according to Thomson Reuters. For the coming quarter those estimates are $0.50 EPS and $15.42 billion in sales.

The most recent market stabilization and recovery could not have come sooner for Dell (and others). Shares ended April at about $16.50 and the stock hit $14.75 before recently recovering to the $15.07 price today. The 200-day moving average was cut through like butter on the downside over the last two weeks and there were four trading sessions that the 200-day moving average acted as a ceiling on. That level is $15.82 and the 50-day moving average is $16.25 as of today.

Analysts still see upside in Dell with the consensus price target of $19.30 representing about 29% upside to Monday’s closing price. Our big complaint is that Dell has so far refused to pay out a dividend. It has chosen to hold cash for a rainy day and to make acquisitions when possible. Dell also barely trades at 7-times its expected fiscal January-2013 year-end consensus targets from Thomson Reuters.

Options traders appear to be braced for a move of only about $0.60 or just over 4% in either direction based upon the speculative June 2012 put and call options prices.

The big question is no longer just PC sales. Dell has been moving into services and consulting for businesses on top of its enterprise sales. We will be looking forward to how Dell talks about the upcoming Windows 8 launch.

Whispernumber.com sent its whisper number to us today and noted that the whisper is also $0.46 just like the official target. It also noted:

Last quarter the company reported earnings in-line with the whisper number. Following that report the stock realized a 3.4% gain in five trading days.
In the comparable quarter last year, the company reported earnings nine cents ahead of the whisper number. Following that report the stock realized an 8.2% loss in five trading days.

JON C. OGG

Filed under: Earnings, PC Companies, Technology Companies Tagged: DELL, HPQ

Whose Earnings Will Be Worse? Dell vs. H-P (DELL, HPQ, AAPL, INTC, AMD, MSFT)

Administrator — Mon, 21 May 2012 16:58:51 +0000

This week is going to be an earnings bonanza for investors who care about makers of personal computers. While Apple Inc. (NASDAQ: AAPL) is all of the rage, we have Dell Inc. (NASDAQ: DELL) reporting earnings after the close of trading on Tuesday and Hewlett-Packard Co. (NYSE: HPQ) reporting after the close of trading on Wednesday.

There are several issues happening almost simultaneously here. Intel Corporation (NASDAQ: INTC) recently reiterated its guidance and this lends more thought to the PC recovery being sustained. Even Advanced Micro Devices (NYSE: AMD) signaled that it sees increased demand for PCs and its processors ahead. The reason is in part due to the Windows refresh cycle as Microsoft Corporation is now just a few months away from its launch of the Windows 8 operating system.

Our big question is simple, yet complicated: How bad will the reports be from Dell and H-P?

Hewlett-Packard Co. (NYSE: HPQ) is in a turnaround and Wall Street refuses to give it any valuation worth noting. Its value is about 6-times expected earnings. The chatter has already been telegraphed that some 25,000 or even 30,000 pink slips are going to be handed out at H-P. That will make its earnings coincide with National Employee Morale Day. H-P is a DJIA component and it is worth under $44 billion in market capitalization now that its stock is down more than half from the peak in early 2011. H-P still trades under $22 and its 52-week range is $21.28 to $37.70 against a consensus analyst price target objective of $29.23 that implies about 33% upside. Thomson Reuters has consensus estimates of $0.91 EPS and $29.92 billion in revenue for H-P.

Dell Inc. (NASDAQ: DELL) is dirt cheap for a tech stock and dirt cheap compared to the market, but against H-P it almost sounds expensive at 7.5-times its forward earnings. Dell is still just under $15 and its 52-week range is $13.29 to $18.36 against a consensus analyst price target objective of $19.43 that implies 30% upside. Thomson Reuters has consensus estimates of $0.46 EPS and $14.89 billion in revenue for Dell.

Analysts still seem to prefer Apple Inc. (NASDAQ: AAPL) over Dell and H-P alike if you just pay attention to the media coverage. What is interesting is that Apple has almost no attention given to its Mac sales at the moment. It is all about iPads, iPhones, and the coming Apple TV. Apple shares are finally recovering with a gain of 4% to $551.00 today. Analysts have a consensus target of $708.55 against the $551 price today. What is interesting is that Apple’s implied upside is about 28%.

Can it be that analysts actually prefer Dell and H-P over Apple as a group? That is what the math says on the surface. The difference is that many of the analysts following Apple are far higher and much more ambitious on Apple than the consensus.

JON C. OGG

Filed under: Calendar, Consumer Electronics, Earnings, Economy, PC Companies, Technology Companies Tagged: AAPL, AMD, DELL, HPQ, INTC, MSFT