Update ASML Holdings (ASML)

I’ve been waiting to see what ASML Holdings (ASML) competitor Veeco Instruments (VECO) would report on July 26. ASML Holdings reported on July 14, the same day as Intel (INTC) and I didn’t want to up my target for ASML Holdings simply out of enthusiasm for Intel’s performance. (For more on Intel’s earnings see my post Update Intel (INTC))

Two weeks later however, Veeco confirmed strength in the chip manufacturing sector. The company announced earnings that beat Wall Street projections by 18 cents a share and revenue projections by 8%, and then raised guidance for the third quarter.

That confirms the July 14 numbers out of ASML Holdings: earnings 17% above projections for the second quarter, revenue 8% above expectations and guidance for fiscal 2010 sales to grow 10% to 15% above historical peak sales. Orders for ASML Holdings lithography equipment, used to etch circuits onto silicon, were 1.18 billion euros in the quarter. That drove the company’s order backlog to 2.4 billion euros as of the end of June.

ASML Holdings was confident enough about growth to predict that it will continue at current levels into 2011. Read more

There’s less bad news in IBM’s earnings than Wall Street thinks

IBM’s (IBM) second quarter revenue miss yesterday (July 19)—the company reported revenue grow of just 2% instead of the 4% to 5% that Wall Street had expected—undermined the entire technology sector. Last week after Intel (INTC) reported earnings of 51 cents a share instead of 43 cents and revenue about $600 million above projections, and then raised guidance for the rest of 2010, Wall Street started to believe that technology could lead an economic and stock market recovery.

The fear today, after IBM’s results, is that technology revenue too is headed into a slump.

I think Wall Street is misreading the messages in both Intel’s and IBM’s quarterly earnings report. The technology recovery was never as widespread as some bulls hoped after Intel’s results. But IBM’s disappointing results don’t change the very real, but somewhat narrower, trend in Intel’s numbers. (For more on Intel’s results see my post Update Intel (INTC).) Read more

Update Intel (INTC)

Sales of server chips were up 170% in the second quarter of 2010 from the second quarter of 2009, Intel (INTC) announced last night (July 13) when the company reported earnings.

When I last updated this stock back in April after the company announced first quarter earnings and an increase in gross margins to 63.4%  I wrote “The company had been projecting gross margins of 58% to 64%. The increase in gross margins is the key piece of news in this report. To get margins up to that level the product mix at Intel has had to shift toward a higher proportion of sales from more profitable server chips. Industry watchers have recently forecast a two-year cycle of big increases in server purchases as corporate customers upgrade their equipment. Intel seems to be signaling that it’s going to ride that trend to higher margins for more than just the next quarter.”

Exactly, Intel said in reporting second quarter numbers. Read more

Update Taiwan Semiconductor (TSM)

Today, April 27, Taiwan Semiconductor Manufacturing, the largest manufacturer of chips for other chip companies including Apple (AAPL) and Intel (INTC), reported first quarter earnings 10.1% above Wall Street expectations. Earnings of $1.07 billion were the highest since the fourth quarter of 2007.

The company said it expects momentum to continue in the second quarter with sales forecast to rise 8.7% to 10.9% from the level of the first quarter. That would push revenue to a company record for a quarter. Gross margin will climb to 48% to 50% in the second quarter from 47.9% in the first quarter, the company projects.

Ordinarily that kind of upside guidance would lead me to increase my target price for a stock. But while as a company Taiwan Semiconductor may be cooking, Taiwan Semiconductor the stock (or actually ADR, American Depositary Receipt,) has a problem that makes me reluctant to raise my target price above the $12.50 a share that I set on January 29. Read more

Buy ASML Holding (ASML)

Talk about rebounds.

In 2009 this maker of lithography equipment used to etch computer circuits onto silicon lost 45 cents per ADS (American Depository Share).

In 2010 Standard & Poor’s is projecting that the company will make $2.41 per ADS.

The reason for the rebound in earnings is pretty simple. Read more