The benchmark PHLX Index (SOX) started the week at 3,366, down 4.05% over the previous week. The SOX is down 14.69% on a year-to-date basis.
Advanced Micro Devices (AMD) is in the news with a $1.9 billion takeover of enterprise services start-up group Pensando, as the chipmaker pushes deeper into the lucrative data center market.
AMD will pay the $1.9 billion -- less adjustments for working capital -- for the Milpitas, California-based group, which includes blue-chip clients such as Goldman Sachs (GS), IBM (IBM), Microsoft (MSFT), and Oracle (ORCL) as part of its customer base, TheStreet’s Martin Baccardax reported.
Data center revenues comprised around a quarter of AMD's 2021 topline, with the group forecasting "another year of significant growth based on the strong customer demand signals for our current and next-generation products".
“With the best performance, security, flexibility and lowest total cost of ownership requires a wide range of compute engines,” said CEO Lisa Su “All major cloud and OEM customers have adopted EPYC processors to power their data center offerings. Today, with our acquisition of Pensando, we add a leading distributed services platform to our high-performance CPU, GPU, FPGA and adaptive SoC portfolio."
AMD said last month that 2022 revenues should come in north of $21.5 billion, a 30% increase from last year that that is also well ahead of the Refinitiv forecast of $19.25 billion, thanks to surging demand for its data center chips.
“For the three months ending in December, AMD posted earnings of 92 cents per share, topping Street forecasts by 16 cents, on adjusted revenues of $4.83 billion,” Baccardax says. “Over the whole of 2021, in fact, cloud and enterprise server chip sales more than doubled, leading in part to the optimism underpinning the 2022 sales guidance.”
Here's a look at some of the other semiconductor stocks TheStreet’s trading experts are focused on this week.
Qualcomm QCOM. $147. 5-day performance (-)7.23%.
Is Qualcomm’s (QCOM) stock thinning out?
That appears to be the case, according to TheStreet’s Bruce Kamich.
In a review of the stock in December, Kamich wrote that "Traders who are long QCOM should raise stops to $172 from $135 ... The $223 area is our new price target but you should also expect some hesitation at the round number of $200." The charts suggest that traders should "continue to hold longs and consider adding to positions on a close above $190. $223 and then $251 are our price targets."
Now Kamich is updating those figures.
“In our charts, we can see that prices stopped short of the $200 round number,” Kamich said. “Prices started to weaken in January but made a late January rebound. This price strength did not last long and prices turned lower again in early February. QCOM is trading below the declining 50-day moving average line and the cresting 200-day line.”
The charts also note that prices have been testing the 40-week moving average line.
“We can also see a potential upside price target in the $201 area,” Kamich added. “A trade at $162 is needed to refresh the uptrend. “
In Kamich’s Point and Figure chart of QCOM, he sees a downside price target of $123.
“The charts of QCOM are rolling over and turning down again on QCOM,” he noted. “Avoid the long side.”
Micron Technology MU $76.89. 5-day performance (-)3.72%.
Last week, Micron (MU) rolled out its second-quarter performance.
In the release, Micron posted GAAP net income of $2.26 billion, or earnings of $2.00 per share. Adjusted net income came in at $2.44 billion, good for adjusted EPS of $2.14 on revenue of $7.79 billion. The sales number showed year-over-year growth of 24.8%, while both top and bottom-line results easily beat Wall Street expectations.
While operating cash flow of $3.63 billion was lower sequentially, it was enough for 18.6% growth from the year-earlier comparable period. Gross margin (GAAP) came in at 47.2%, up from 46.4% three months ago and widening from 26.4% one year ago.
According to Chief Business Officer and interim CFO Sumit Sadana, who spoke on the earnings call, "Revenue was particularly strong in client and cloud markets."
The robust numbers should mean Micron is a stock that’s on the way up, TheStreet’s Stephen Guilfoyle said.
“The company’s balance sheet is as clean as a whistle and gets high marks,” Guilfoyle noted. “Guidance-wise, Micron expects to drive sales of $8.5B to $8.9B for the current quarter, which is well above the $8.1B that Wall Street was looking for.”
“The company sees adjusted EPS landing in a range spanning from $2.36 to $2.56 versus the $2.21 that Wall Street had in mind,” he added. “Gross margin is expected to end up around 47%, or 48% adjusted.”
Guilfoyle was able to find six sell-side analysts who tracked Micron since earnings were released and are also rated at five stars by TipRanks. Of the six, there are five "buy" of "buy equivalent" ratings and one "equal weight" which he considers to be "hold equivalent."
“There were a number of price target increases made overnight, even from the "hold" in the mix,” Guilfoyle said. “The average price target of these six is $122.33 with a high of $165 (Hans Mosesmann of Rosenblatt Securities) and a low of $83 (Joseph Moore of Morgan Stanley, who is the "hold").”
Acknowledging that he’s long Micron, as well as a basket of semiconductor names that also includes Nvidia (NVDA), Advanced Micro Devices AMD, and Marvell Technology (MRVL), Guilfoyle is bullish on the stock.
“MU stock trades at eight-times forward-looking earnings, and I believe that demand for what Micron does will outpace supply and/or capacity for some time,” he noted. “That said, Micron seems to always trade at single-digit multiples so it is not necessarily "cheap" here, but the stock is certainly not (opinion) expensive.”
“While the Full Stochastics Oscillator hints at the stock being short-term overbought, both Relative Strength and the daily Moving Average Convergence Divergence (MACD) say it could still have a long way to go,” he added.
Overall, Guilfoyle pegs an MU price target of $115; a pivot-price of $96, an “add” at $80; and a “panic price” of $78.
NXP Semiconductors NXPI $183.49. 5-day performance (-)2.69%.
TheStreet’s Kamich last reviewed NXP (NXPI) in November, 2021 just ahead of earnings.
At the time, Kamich wrote "I have no special knowledge about what NXPI is going to report, but the charts are positive and NXPI looks ready to break out of its long sideways consolidation pattern. Traders could go long here risking $185. The $246 area is our price target for now."
Traders caught a rally short of our $246 target before NXPI started to decline in early January, but now it’s time to probe the charts once again.
Recent NXPI daily bar charts show that prices declined from January to an early March low,” Kamich said. “Prices have firmed to test the declining 50-day moving average line. The 200-day moving average line is in a slight decline and intersects around $208.”
Meanwhile, Kamich sees some lower shadows below $180, which reflects traders rejecting recent lows. Additionally, the 40-week moving average line has a negative (bearish) slope.
“Traders could probe the long side of NXPI on a dip back to the $190 area risking to $180,” Kamich said. “The $221 area is our first potential price target, although a rise to $233 could be in play.”
