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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

Stabilizing DRAM Prices, Looking Beyond Chip-Maker Warnings (MU, FSL, WFR, ISSI, SNDK, CODE, TXN, SMH, XSD, USD, SOXL)

Administrator — Wed, 14 Sep 2011 14:34:36 +0000

DRAM price trends were not exactly going that great for chip makers this summer. It was brutal. Now we are seeing some production cuts, so even if demand is slack this is offering some price stability for DRAM manufacturers and even for other aspects of the semiconductor group. New data from DRAMeXchange is showing that the first half of September saw 2GB contract prices flat as production cuts are bringing relief. If this holds, it ends a 5-month downtrend.

The report shows that the DDR3 2GB contract price stayed flat at an average $10.75, but the DDR3 4GB ASP did fall slightly by about 4.6% to $20.50 because DRAM makers were increasing shipment volumes. Also noted, “From the market perspective, benefiting from production cuts by Japanese and a number of Taiwanese manufacturers, the spot market continually saw price rebounds. While the increases only lasted a few short days at a time, the effects of supply-side production cuts were enough to present the depressed spot market with a chance to recover slightly.”

This showed that the difference between contract and spot unit price for DDR3 2Gb chips has shrunk to 12%. And the DRAM maker hopes… “finally putting an end to the dismal DRAM price trend of the past few months.”

Here is how brutal the trend was… Since June, the DDR3 2GB contract price fell over 40% to a low of $10.50. Sadly, this breaks the cash cost for the majority of DRAM makers. On this front it was noted, “PC OEMs’ September inventory restocking has been much better than in the previous few months, causing 2GB contract price to stay flat. Although the market currently remains in a state of oversupply, production cuts across the board have improved the DRAM oversupply situation and eased the price decline.” As a result, some DRAM manufacturers have started quoting higher spot prices.

Micron Technology Inc. (NYSE: MU), Americas home-grown DRAM giant, is up 3.3% at $7.09 and its 52-week range is $5.18 to $11.95. Freescale Semiconductor Inc. (NYSE: FSL) has been a dismal memory IPO but even its shares are up 1.8% at $12.45 and the post-IPO range is $9.43 to $20.97.

MEMC Electronic Materials, Inc. (NYSE: WFR) makes silicon materials for chips (and for solar) and its shares are trading flat at $6.80 versus a 52-week range of $4.96 to $15.04. Unfortunately, MEMC seems to be lost.

DRAM is certainly not flash memory… Still, we cannot ignore that what may be good news for the DRAM players could ultimately end up being some of the same for flash makers. A smaller independent DRAM and SRAM maker Integrated Silicon Solution, Inc. (NASDAQ: ISSI). Its shares are up 1.6% at $8.56 and the 52-week trading range is $7.01 to $11.79. SanDisk Corp. (NASDAQ: SNDK) is up 3% at $42.19 and its 52-week range is $32.24 to $53.61. There is also Spansion Inc. (NASDAQ: CODE) in NOR Flash and it is only up 0.5% at $14.08 with a 52-week range of $12.82 to $21.60.

Texas Instruments Inc. (NYSE: TXN) is also on many aspects of memory and components under the semiconductor sector. Despite a cautious outlook given recently, TI’s stock is up 0.7% at $26.84 and the 52-week trading range is $24.11 to $36.71.

The Semiconductor HOLDRs (NYSE: SMH) ETF is up 0.7% at $29.80 today and the 52-week range is $25.87 to $36.99. SPDR S&P Semiconductor (NYSE: XSD) is less liquid as an ETF, but it has a better representation of component weightings. Its shares are up 0.8% at $47.08 against a 52-week range of $41.71 to $64.06.

When we covered our Technology Value Series in August, we warned about the potential warnings or lowering of estimates. That has also come about. We also noted that the calendar may work against the sector into September, but then the calendar is generally believed to be favorable for the sector on a historic basis. We are now almost in the second-half of September.

We strongly suggest for traders and investors to understand all of the nuances and details of these leveraged ETFs, but there are two to consider if you truly believe that DRAM makers are going to have a marked improvement. The 200% mover is the ProShares Ultra Semiconductors (NYSE: USD) exchange traded product and the 300% mover is the Direxion Daily Semicondctor Bull 3X Shares (NYSE: SOXL). You are on your own on those.

Unfortunately, some of the market strength seen his morning is coming out and these winners are now not up as much as they were in the first 30 minutes of trading.

JON C. OGG

Filed under: Economy, International Markets, PC Companies, Research, Semiconductor, Trading Alert Tagged: CODE, FSL, ISSI, MU, SMH, SNDK, SOXL, TXN, USD, WFR, XSD

The Twitter-24/7 Wall St. Stock Market Report 7.19.2010 The Wisdom Of Crowds

247wallst — Mon, 19 Jul 2010 12:34:12 +0000

Twitter has, by most estimates, 100 million members, which makes it one of the largest social networks in the world. All major media companies are on Twitter and some have more than one million Twitter users. It raises the question of whether there is wisdom in crowds.

24/7 Wall St. will look at the Twitter posts at Reuters Biz, WSJ, Financial Times, CNN Money, MarketWatch, CNBC, and 24/7 Wall St. each day to see which stocks are most frequently mentioned. It is clear that in this area of social media these tweet are a sign of which companies the Twitter universe is interested in. These financial sites are followed by a combined 625,000 Twitter users which makes them a sizeable sample of Wall St.’s interests. In some cases, we will publish the actual tweets from the sites.

Among the most tweeted stocks on StockTwits MACRO, USD, Nvidia(NASDAQ: NVDA), Zion Bancorporation (NASDAQ: ZION), Las Vegas Sands (NASDAQ: LVS)FT: BP shares fall amid fresh spill fears: BP’s shares have fallen as much as 5 per cent amid fears that some of the c… http://bit.ly/9z2vIc

CNN Money: Boeing wins $9.1 billion order from Emirates http://bit.ly/bjJIz0

Yahoo! Finance: Healthscope recommends $1.72 billion takeover offer from Carlyle and TPG Capital http://yhoo.it/9bduZP

DailyFinance: Google to Stop Selling Nexus One Smartphone http://bit.ly/aze6Zz

DailyFinance: China Now World’s Top Energy Consumer, Displacing U.S. http://bit.ly/cr0RSZ

Daily Finance: Moody’s Downgrades Ireland’s Credit Rating http://bit.ly/cx68U0

Douglas A. McIntyre

Filed under: Research Tagged: LVS, MACRO, NVDA, USD, ZION

Applied Materials 360-Degree View Before Earnings (AMAT, SMH, USD)

247wallst — Wed, 11 Nov 2009 17:12:02 +0000

Applied Materials Inc. (NASDAQ: AMAT) is on deck for earnings this afternoon right after the market closes. The chip equipment giant, and relatively new solar player, is the king of its sector to most traders and investors and will potentially have an impact on all the chip equipment stocks in the sector. Estimates from Thomson Reuters are $0.03 EPS and $1.32 billion in revenues for its October quarter, which is also its year-end with estimates of -$0.14 EPS and $4.80 billion in revenues.

Applied Materials does represent about 13.55% of the Semiconductor HOLDRs (NYSE: SMH) ETF, but only represents about 5% of the Ultra Semiconductor ProShares (NYSE: USD) ETF. We will be looking to its fiscal-2010 comments more than this last quarter.

While many analysts expect a recovery for 2010, with Thomson Reuters estimates at $0.38 EPS and $6.20 billion in revenues (higher than just a week ago), there is the notion of what to say about valuation and its stock performance. With a loss for 2009 and with a P/E ratio of over 30 for next year, the bulls have to bet that the semiconductor companies are going to hike orders well above what the official expectations reflect even after considering the recently raised estimates.

Applied Materials was at $12.40 just on the close Friday, and shares are at $13.17. This new increase represents gains of over 50% from March 9 and 15% just since June 30. What is important here is the stock chart. Shares did not get back down to the 200-day moving average two weeks ago ($11.66 now) and the current 50-day moving average ($13.02) was pierced this week. $13.75 has acted as strong resistance in September and October.

Analysts are mixed and it appears that a consensus price target is over $15.00. Options have been a bit active today ahead of earnings and it appears as though options traders are not really bracing for a move of more than $0.40 in either direction.

What is interesting is that the earnings reaction from Applied Materials is not likely to run back upstream to the end-users and makers of chip and semiconductors. We have already seen their earnings and more importantly their guidance, and in theory they can all hold off on cap-ex spending even if a recovery comes on stronger than what has been seen and compared to what is expected. At the same time, cap-ex and equipment purchasing has greatly lagged the overall chip and tech recovery and Applied’s comments may potentially be key for evaluating semiconductor companies on their expense plans farther out into 2010.

Lastly, we will be paying close attention to what the company says regarding its solar operations for 2010. The entire sector is under pressure as margins are contracting and orders are getting harder to come by or are getting pushed out. Solar can be and is a great help to the energy problems that America and all countries face, but in many aspects these solar stocks may represent nothing more than a call option on much higher oil prices. Stay tuned.

JON C. OGG
NOVEMBER 11, 2009

Posted in Alternative Energy, Earnings, Semiconductor, Technology Companies Tagged: AMAT, SMH, USD

Intel Bedazzles (INTC, SMH, USD)

247wallst — Tue, 13 Oct 2009 20:20:58 +0000

Intel Corporation (NASDAQ: INTC) has just reported earnings and gave guidance for the quarter ahead. The processor giant posted $0.33 EPS and $9.39 billion in revenues. Consensus estimates from Thomson Reuters were $0.28 EPS and $9.04 billion in revenues. Gross margin also came in 57.6%, above expectations of 54%. Intel gave guidance of $10.1 billion in revenues, plus or minus $400 million; it also gave guidance for 62% gross margin, plus or minus 3 points. Next quarter’s estimates from Thomson Reuters are $0.34 EPS on $9.51 billion in revenues.

Intel is cutting its cap-ex expectations for the year. The new range is $4.5 billion, plus or minus $100 million; and that is down from $4.7 billion, plus or minus $200 million. As a reminder, additional data will be out in the conference call and this is effectively all unfinished business. We are seeing a reaction in the Semiconductor HOLDRs (NYSE: SMH) after a 0.15% drop to $26.24 with an after-hours level of up 2.7% at $26.20, and the Ultra Semiconductor ProShares (NYSE: USD) closed down 0.44% at $29.57 and it is trading up almost 5% at $29.80.

Intel closed up unofficially at the 4:00 bell by 0.44% at $20.49 and its 52-week trading range is $12.05 to $20.69. Shares were halted ahead of the news.

UPDATE at 4:46 PM EST: Intel had traded 99.267 million shares before being halted and the stock is now trading up 6.7% at $21.74 and the trading volume is listed as 102.9 million shares.

Jon C. Ogg
October 13, 2009

Posted in Earnings, Semiconductor, Technology Companies Tagged: INTC, SMH, USD

Intel To Set Tech Earnings Pace (INTC, AMD, SMH, USD)

247wallst — Tue, 13 Oct 2009 16:25:07 +0000

Intel Corporation (NASDAQ: INTC) reports earnings after the close of trading today and is the first of the tech giants to report. Consensus estimates from Thomson Reuters have actually come up a bit in recent days on rounding higher. We now show that consensus estimates are $0.28 EPS and $9.04 billion in revenues (up from $0.27 and $9.02 billion last week). Intel does generally offer guidance and next quarter estimates are $0.34 EPS on $9.51 billion in revenues. What we want to look at are what the charts, analysts, and stock options are factoring in.

While we will be looking for direct comparisons in Microsoft, Advanced Micro Devices Inc. (NYSE: AMD) is the most directly tied to the company because of processors. And in ETF-Land, Intel’s weighting in the Semiconductor HOLDRs (NYSE: SMH) is approximately 23% and it is 29.1% of the weighting of the Ultra Semiconductor ProShares (NYSE: USD).

Be advised, Intel’s guidance was raised just over a month ago based on “stronger than expected demand for microprocessors and chipsets.” Intel put guidance at $9.0 billion in revenues, plus or minus $200 million, That was above its prior guidance of $8.5 billion, plus or minus $400 million. Intel also put gross margin percentage “in the upper half of the previous range of 53 percent, plus or minus two percentage points.” To show just how much higher estimates are, that earnings outlook from analysts is 40% higher than it was just about two and a half months ago.

Some analysts are still cautious, but the big calls in recent weeks were mostly positive. Analysts have an average price target between $22.00 and $23.00, which is not exactly a huge bullish stance considering the $20.65 price today after a 1.2% gain.

Intel recently bounced after briefly trading under its 50-day moving average. That figure is currently listed as $19.38, so we’d look to that for an implied absolute support area if the company suddenly somehow manages to disappoint with guidance. The area where Intel is trading today and yesterday was also a toppy area back in September.

Options traders appear to be braced for a move of what looks to be only about $0.60 to $0.70 in either direction. With options expiring on Friday, there is a very low time value premium left in these options.

As we noted over the weekend, since the end of June Intel is up 22.5% and since the March 9 close (widely recognized as the absolute market bottom day) this is up over 60%. That being said, Intel may have beat targets and raise estimates to keep everyone happy or at least to keep investors from wanting to lock in some profits.

JON C. OGG
OCTOBER 13, 2009

Posted in Earnings, ETF, Semiconductor, Technology Companies Tagged: AMD, INTC, SMH, USD