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.
EMC earnings show continued strength in technology hardware
Not the home run that Intel (INTC) hit with its earnings but EMC’s (EMC) results back up my theory that technology hardware companies with new products offering more power at lower prices and lower operating costs will show strength in 2010 even if the economy stumbles.
In my June 20 post “There’s less bad news in IBM’s earnings than Wall Street thinks” (http://jubakpicks.com/2010/07/20/theres-less-bad-news-in-ibms-earnings-than-wall-street-thinks/ ) I argued that Wall Street had misunderstood the lessons of IBM’s and Intel’s second quarter earnings. Not all technology stocks would report better than expected results for the quarter and guide higher for the year, as Wall Street concluded after Intel’s earnings. Technology hardware companies with new products that promised attractive short-term returns, however, would do well despite IBM’s disappointing results.
Intel was one of these in my opinion. Cisco Systems (CSCO), due to report on August 11, was likely to be another. And EMC, which reported second quarter earnings this morning, would give me a quick test of my thesis.
Today’s (July 21) results from EMC support my argument, I think.
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.
Update Taiwan Semiconductor (TSM)
Everything is working out exactly as I planned when I bought Taiwan Semiconductor Manufacturing (TSM) on October 20, 2009—with the small exception of the share price.
When the company reported fourth quarter 2009 earnings on January 28, it confirmed the two major parts of my investment thesis.
First, a global recovery in the PC, wireless handset, and digital consume product markets has started to drive up sales. In the fourth quarter sales grew by 43% from the fourth quarter of 2008. For 2010 Taiwan Semiconductor forecast a 29% growth rate for the semiconductor foundry industry.
Buy Intel (INTC)
Sell on the news, is it?
Well, thanks.
I thought Intel (INTC) would run away from me after yesterday’s (January 14) great earnings report but apparently traders have decided to take profits on the news ahead of the long Martin Luther Day weekend. And that gives me a chance to add the shares of Jubak’s Picks.
(I think it looks increasingly like the market will be able to depend on technology stocks for leadership in early 2010. Good thing because the other sector showing signs of leadership recently, financials, looks likely to stumble. See my post http://jubakpicks.com/2010/01/15/even-jpmorgan-chase-is-still-putting-new-money-away-to-cover-bad-loans/ )
Intel reported fourth quarter earnings of 40 cents a share, 10 cents a share better than Wall Street projections, and revenues of $10.57 billion (up 28.5% from the fourth quarter of 2008) and above the $10.17 consensus. Gross margin came in at 65% versus a Wall Street projection of 62.2%.
For the first quarter of 2010 Intel told Wall Street to expect revenue of $9.3 billion to $10.1 billion versus Wall Street’s pre-earnings report projections of $9.35 billion.
Intel’s results were especially strong for chips for servers where average selling prices increased, for notebooks, and for the low-power Atom processor designed for netbooks.
With Wall Street expecting an upturn in PC sales—which Intel’s results and comments confirmed—where did the surprise come from?
