Texas Instruments, Silicon Laboratories, Teradyne all beat Street
Chip stocks outperformed the broader market Wednesday and closed at a sixth straight record high following a wave of earnings beats and outlooks that hinted the sector may be creeping out of inventory oversupply issues that have dogged it for several months.
The PHLX Semiconductor Index SOX, +0.95% rose 1% to close at a record 1,589.02 on Wednesday, after being up nearly 2% earlier, compared with slight losses for the S&P 500 index SPX, -0.22% and Nasdaq Composite COMP, -0.23% That gave the SOX index its sixth record-high close in a row. The index is up 7% since its recent run started on April 16, and up 38% for the year, compared with a 17% year-to-date rise on the S&P 500 and a 22% gain on the Nasdaq.
After Wednesday’s close, Xilinx Inc. XLNX, +1.87% shares dropped 12% after hours, following a 1.9% rise to close at $139.72, even as results topped Wall Street estimates. Xilinx shares have rallied 118% over the past 12 months.
On the other hand, shares of Lam Research Corp. LRCX, +0.34% rose 5% after hours, following a 0.3% rise to close at $195.44, after a big beat on earnings.
Texas Instruments Inc. TXN, +1.76% shares closed up 1.8% at $118.43 after the chip maker’s earnings topped Wall Street estimates but forecast second-quarter earnings and revenue ranges that bookended the Street consensus. But it was the company’s 5G chip results that interested analysts the most.
Mizuho analyst Vijay Rakesh, who has a neutral rating and raised his price target to $110 from $103, said Texas Instruments results underscored that chip sales for auto and industrial uses will be weak in the June-ending quarter and that the company was “not seeing a pickup in most markets except for 5G.”
5G chips figured in Apple Inc. AAPL, -0.15% and Qualcomm Inc.’s QCOM, +0.13% recent settlement, which prompted Intel Corp. INTC, -0.10% to announce it was exiting the 5G smartphone modem market soon after.
Jefferies analyst Mark Lipacis, who has a buy rating on Texas Instruments and a $137 price target, said he sees that “supply-chain inventories are clearing out and semis are entering a sustained period (20+ months) of upward revisions,” and called Texas Instruments’ second-quarter forecast conservative and beatable.
In his nod to the 5G market, Lipacis underscored that most of the first-quarter upside for Texas Instruments communication equipment orders was from China, and pointed to phone maker Huawei Technologies Co.’s earnings as a big driver.
Susquehanna Financial Group analyst Christopher Rolland, who has a positive rating on Texas Instruments and raised his price target to $135 from $112, called the 5G situation at Texas Instruments a “conundrum.”
“While results/guidance were likely ‘better than feared’ given the constant stream of disappointing intra-quarter data points, management suggested the ‘lumpy’ communications market helped results greatly,” Rolland said.
“Indeed, management called out ~30% YOY growth in Comms, owing to 5G strength (after +20% YOY growth last quarter),” the Susquehanna analyst said. “However, investors are likely to attribute less value to this more temporary revenue stream and extrapolate weaker results for TI’s broader businesses; hence, the ‘5G conundrum.’”
Meanwhile, shares of Silicon Laboratories Inc. SLAB, +17.56% rallied after the maker of analog-intensive and mixed-signal integrated circuits reported earnings and an outlook that topped Street estimates. Shares closed up 18% at $110.04.
Early Wednesday, Silicon Laboratories reported adjusted first-quarter earnings of 59 cents a share on revenue of $188.1 million, while analysts polled by FactSet were looking for 47 cents a share on revenue of $188 million. The company forecast second-quarter earnings of 70 cents to 80 cents a share on revenue of $202 million to $212 million, compared with the consensus of 63 cents a share on revenue of $201.9 million from analysts.
“We exited 2018 with strong design win momentum and leading positions in key secular growth markets,” said Tyson Tuttle, chief executive of Silicon Laboratories, in a statement. “Despite macro turbulence, Q1 bookings were robust, signaling a Q2 rebound. We believe we are well-positioned to outperform the market.”
Similarly, shares of Teradyne Inc. TER, +7.63% surged 7.6% to close at $47.99 after the testing and industrial automation-equipment maker also handed in an earnings beat.
Teradyne reported adjusted first-quarter earnings of 54 cents a share on revenue of $494.1 million, while the Street had forecast earnings of 44 cents a share on revenue of $476.2 million. Teradyne forecast adjusted second-quarter earnings of 56 cents to 65 cents a share on revenue of $520 million to $550 million. Analysts expect 58 cents a share on revenue of $538.3 million.
Other better-than-average-performing chip stocks that closed up 1.5% or more included Advanced Micro Devices Inc. AMD, +1.75% , Analog Devices Inc. ADI, +2.79% , Cypress Semiconductor Corp. CY, +2.09% , KLA-Tencor Corp. KLAC, +2.01% and ON Semiconductor Corp. ON, +1.86%
Thursday after the bell, Intel Corp. is scheduled to report its quarterly earning’s with AMD scheduled to report next week on April 30.