Taking Stock: Chipmaking stocks moved higher for the second consecutive week but investors' enthusiasm was subdued following mixed readings of consumer spending and confidence. With the earnings season over, investors have been focusing primarily on the economic news for direction. The most important news was retail sales, which posted a surprising increase in February. They're up 0.3%, beating analysts' expectations of a 0.2% decline. January's estimates were also revised upwards to 0.1%. A weaker report on consumer confidence disappointed investors who were looking for an increase in March. Consumer sentiment index fell to 72.5 from 73.6 in the previous March.
Equipment stocks were the best performer for the second straight week, increasing 2.1%. Chips were up 0.5%, while the S&P 500 was up 1%. The hot stock of the week was Kulicke & Soffa with a nice 7% gainer. Krish Sankar of Bank of America reiterated his buy rating and upped estimates for K&S' stock, citing strong momentum in the quarter. He noted that with OSATs continuing their near-term spending to add more capacity and upgrading gold wire bonders to copper, we expect this strong momentum to last beyond the March quarter. As a result, the bank raised K&S' FY 2010 and FY 2011 estimates to $569 million / $0.85 and $621 million / $1.02, respectively. The bank also raised its price objective from $7 to $8.25.
So here's all the data:
The stock indices are indexed to 100 at the beginning of the year. So 108 means that the index is up 8% for the year. Chips-to Coffee is the ratio of Intel to Starbucks Stock Price-to-Earnings (P/E) ratios. The P/E ratios are based on Friday's close divided by earnings per share for the most recent four quarters. Forward P/E ratios are calculated using the estimates for the next year published at Yahoo Finance. It is intended as a quick measure of how investors view the health of the chip industry relative to the trendy side of the old economy, with the view that by taking a ratio of the valuations of the leaders is an approximation of this. Both companies are the leaders in their areas as well as being leading edge in product delivery.
Chip Making Stock Performance
(Stock Prices Indexed to 100 in last week of 2009)
145 135 125 115 105 95 85 75 65 55 45 35 Jul-06 Jul-07 Jul-08 Nov-06 Nov-07 Nov-08 Jul-09 May-07 May-08 May-09 Nov-09 Jan-07 Jan-08 Jan-09 Mar-07 Mar-08 Mar-09 Jan-10 Sep-06 Sep-07 Sep-08 Sep-09 Mar-10
Stock Prices: Chips Stock Prices: Equipment Stock Prices: HT2 S&P 500
Copyright 2010 by VLSI Research Inc. All rights reserved.
Stock Watch: Ultratech is the leading supplier of lithography systems for
packaging, where it continues to maintain over 70% market share. Ultratech continues to lead the packaging lithography market because their 1X technology is well differentiated and addresses the cost of manufacturing. This has proven a huge barrier for any other lithography technologies. Ultratech is in the process of repeating leadership in LED manufacturing. The company recently introduced the new Sapphire 100 stepper for HBLED manufacturing. Ultratech's 1X lithography technology clearly benefits HBLED manufacturers with lower defectivity, improved overlay, expendability in resolution, and lower cost. This will result in higher profits for HBLED manufacturers compared to other lithography technologies. The company's Laser Thermal Annealing technology has been established as a replacement for existing lamp-based systems. Ultratech currently holds the leading position in the growing milli-second RTP market. The chairman and CEO, ARTHUR ZAFIROPOULO, has systematically positioned the company's products so that they are difficult to compete against (he won SEMI's Bob Graham Award in 2000). Art's ability to stay ahead of the trend is legendary. He has always advocated and maintained a rock-solid balance sheet for the company. This will be key for equipment companies
managing through this downturn successfully. For more research: Ultratech's ticker is UTEK 100313
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