Semiconductor stocks’ reaction to earnings
After bottoming out in December, the stock market has been showing signs of recovery. Semiconductor stocks have been recovering this month due to anticipation that the second half of 2019 will bring growth. However, this week has been very volatile for semiconductor stocks—most companies reported weak earnings and guidance, with just a few exceptions, such as Xilinx (XLNX). Although some companies reported declining earnings and guidance, such as Texas Instruments (TXN) and Lam Research (LRCX), their stocks rose as the declines were lower than anticipated.
Intel (INTC) and Western Digital (WDC) reported their December-quarter earnings yesterday, missing analysts’ estimates. Their March-quarter guidance also missed analysts’ estimates. Intel, which did not announce a new CEO and guided for just 1% revenue growth in fiscal 2019, saw its stock fall 7% after hours yesterday. On the other hand, WDC stock rose 9.3% after hours, as the company expects growth to pick up in the second half of this year.
Intel’s fourth-quarter 2018 revenue and first-quarter 2019 revenue guidance missed analysts’ estimates due to a slowdown in sales to cloud customers, weak modem orders from Apple (AAPL), declining NAND (negative AND) prices, a slowdown in China, and production constraints for 14nm (nanometer) processors.
NAND chipmaker WDC’s fiscal 2019 second-quarter revenue and earnings missed analysts’ estimates, as did its guidance for the third quarter of fiscal 2019, due to declining NAND prices. WDC expects NAND prices to bottom out in the first half of this year, and for cloud computing demand to revive in the second half.
Technical analysts’ take on semiconductor stocks
According to CNBC, Oppenheimer analyst Ari Wald stated that semiconductor stocks reacted ahead of the S&P 500 last year, and that the recent optimism in semiconductor stocks should improve technology stocks, which should improve the overall market. However, he expects semiconductor stocks to bottom out before seeing a bullish momentum in the second half of this year.
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