Weekly Tech Update: AMD, INTC, CREE, FFIV, NVDA, QCOM, TXN

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The semiconductor industry has been one of the strongest performing sectors in 2014.  As of market close on October 3rd, its benchmark (the Philadelphia Semiconductor Index, or Sox) was up 16% year to year and 6% year to date, driven by the improvement in the PC market, continued strength in personal, network and service provider communications, and increasing electronics adoption more broadly in the global markets.  However, in the recent past, there have been signs in the past week of decreased demand in at least certain markets and regions. A leading microcontroller manufacturer, Microchip (MCHP, not covered) pre-announced negatively, attributing lower-than-expected revenues to a fall of in demand in China. The Sox fell a very large 7% on the news.  It is now up 15% year to year and just 8% year to date.

We are in the midst of the earnings season and look forward to the same to get a better perspective on different companies’ view on the long-term industry demand. Below is a weekly update for some of the technology companies that Trefis covers.

See Our Complete Analysis for These Companies Here

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AMD

AMD (NYSE:AMD) reported its Q3 2014 earnings on October 16. (Read: AMD Misses Its Q3’14 Guidance: Weak Computing & Graphics Performance But Semi-Custom Business Remains Strong) The company missed its revenue guidance and expects a significant sequential  decline in revenue in the current quarter.

The stock price declined marginally last week (~7%). Our valuation of $4.17 is more than 50% above the current market price. The company’s current market cap is around $2 billion. We forecast AMD’s 2014 revenue to increase to $5.4 billion and net income to turn positive by year end. Our GAAP and non-GAAP diluted EPS estimates stand at $0.15 and $0.37, respectively. We are in the process of updating our price estimate for the company.

Intel

Intel (NASDAQ:INTC) set new records for revenue and earnings per share (EPS) in Q3 2014, reported on October 14. (Read: Intel’s Growth In Q3’14 Fueled By Stabilizing PC Demand, Higher PC Market & Strong Data Center Performance) The company announced the launch of Padphone Mini in the U.S. in collaboration with ASUS and AT&T. Intel also introduced the industry’s first solution (Data Protection Technology) to provide end-to-end encryption of consumer and financial data that is built into the point of sale (POS) platforms and launched the “The Intel Experience” exclusively in 50 Best Buy retail stores across the U.S. (Read Press Releases)

Our valuation of $34 (market cap of $165 billion) for the company is now at a approximately 10% higher than current market price (market cap of $151 billion). We expect Intel to report revenue of around $53 billion and net income of $11 billion for 2014. We forecast non-GAAP diluted EPS of $2.38, which above the market consensus of $2.18.

CREE

Last week, Cree (NASDAQ:CREE) expanded its award winning silicon-carbide (SiC) module family with a new 20-A, all-SiC module. (Read Press Release) The LED manufacturer will report its Q1 2015 earnings October 21. (Read Our Pre-Earnings Aticle)

Cree’s stock price has been on the downhill since the company announced its preliminary results for Q1 2015 but the stock gained approximately 10% last week. Our valuation of $52 for the company is now at a more than 50% premium to the current market price. We will update our valuation after the full Q1 2015 earnings release on October 21. For calendar year 2014, we forecast Cree’s revenue and net income at $1.77 billion and $160 million, respectively. For fiscal year 2014 (ended June), we estimate non-GAAP diluted EPS of $1.87 as compared to the market consensus of $1.85.

F5 Networks

F5 Networks (NASDAQ:FFIV) was identified as one of the industry’s top Web Application Firewall vendor in recent benchmarking reports from NSS Labs, last week. (Read Press Release) Our price estimate of $118 for F5 Networks is marginally below the current market price, which translates into market cap of approximately $8 billion. We expect the company to witness double digit growth in its revenue for calendar 2014. Our non-GAAP diluted EPS estimate for fiscal year 2014 (ending September) stands at $5.12, as compared to the market consensus of $5.33.

Nvidia

Last week, Nvidia (NASDAQ:NVDA) announced that Airbus, CH2M Hill and MetroHealth and the first companies to try its GRID virtual GPU. The company also announced that Google’s Nexus 9 tablet, which is powered by Tegra K1, is the first tablet to feature the latest version of the Android operating system. (Read Press Releases)

Nvidia’s stock fluctuated between $17 – $18 last week. Our price estimate of $19 for Nvidia is marginally above the current market price. The company has a market cap of approximately $10 billion. We estimate Nvidia will report revenues of around $4.3 billion and net income in excess of $600 million this year. We forecast a non-GAAP diluted EPS of $1.42 as compared to the market consensus of $1.00.

Qualcomm

Qualcomm (NASDAQ:QCOM) agreed to acquire UK based chipmaker CSR for approximately $2.5 billion to expand in technology for connected devices, last week. The company also announced a quarterly cash dividend of $0.42 per common share, payable on December 18, 2014. Our price estimate of $74 for Qualcomm (market cap of 125 billion) is only marginally above than the current market price of $72 (market cap of $122 billion). The stock traded between $71 and $73 last week. We expect the company to report revenue of around $28 billion and net income of $7 billion for calendar year 2014. For fiscal year 2014 (ended September), we forecast non-GAAP diluted EPS of $5.14 as compared to market consensus of $5.31.

Texas Instruments

Texas Instruments (NASDAQ:TXN) declared a quarterly cash dividend of $0.34 per share of common stock, payable November 17, 2014, and announced a series of new products, last week. (Read Press Releases) TI’s stock price increased marginally last week (~5%) Our valuation of $42 (~ $45 billion market cap) for TI is slightly below the current market price. We expect the company to report $13.1 billion and $2.6 billion in revenue this year. Our GAAP diluted EPS forecast for TI stands at $2.43 while the market consensus is at $2.41. We will update our valuation for TI after the Q3 2014 earnings release on October 20. (Read Our Pre-Earnings Article)

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