Chip Stocks AMD, Intel, Texas Instruments and Qualcomm Earnings Ahead

In a huge week for technology earnings top semiconductor companies report Q1 results in the week ahead. Big names include Texas Instruments $TXN, Advanced Micro Devices $AMD, Qualcomm $QCOM and Intel (INTC).

In a huge week for technology earnings top semiconductor companies report Q1 results in the week ahead. Big names include Texas Instruments $TXN, Advanced Micro Devices $AMD, Qualcomm $QCOM and Intel (INTC). 

Technology Chips

Texas Instruments $TXN Reports on Tuesday 

Analysts expect TI to earn $1.11 a share, up 14% year over year, on revenue of $3.65 billion, up 7% for the year in the March quarter. 

$TXN is seen benefitting from the high-margin & high-growth areas of the analog and embedded processing markets which has seen growth for the last four quarters. While TI’s increasing exposure to the industrial and automotive markets is positive, weakness in communications equipment and personal electronics markets are weak areas.

TI’s is driven by strong performance in almost all the product lines. Of note after $LRCX warnings is  that $TXN enjoys a cost advantage on every wafer that it builds using the 300-millimeter technology against 200-millimeter technology. This competitive advantage is expected to drive growth with consensus for the analog segment revenues at $2.44 billion.

Advanced Micro Devices $AMD Reports on Wednesday

Analysts expect AMD to earn 9 cents a share which would reverse a year-earlier loss of 4 cents a share, on sales of $1.57 billion, up 59%. 

The PC market has been a battleground between AMD’s Ryzen CPUs and Intel’s 8th-gen Core CPUs that deliver sizable performance gains relative to comparable 7th-gen chips. AMD has upped the ante by launching second-gen Ryzen CPUs that improve on the performance of last year’s and are priced fairly aggressively.

AMD Rizen Rollout

Ahead of earnings on Thursday $AMD launched 4 second-gen Ryzen desktop CPUs. The two most powerful chips in the lineup, the Ryzen 7 2700X and 2700, each contain 8 cores and can run 16 simultaneous threads, and are priced at $329 and $299, respectively. Two less-powerful chips, the Ryzen 5 2600X and 2600, each contain 6 cores and support 12 threads, and are priced at $229 and $199, respectively. While the products are only modestly cheaper than comparable 8th-gen Intel CPUs Intel’s “K” CPUs don’t ship with cooling fans/heatsinks  AMD’s new Ryzen CPUs are bundled with quality coolers (average $35 value).

Shares Closed Friday at $9.99  with the stock in a 52-week range of $9.04 to $15.65.

Qualcomm (QCOM) Reports on Wednesday 

Analysts expect Qualcomm to earn 70 cents a share, down 48%, on sales of $5.19 billion down 13% in its fiscal second quarter.

$QCOM has been among the headlines this quarter with the failed Broadcom takeover attempt and a legal dispute with major customer Apple which has hurt its results in recent quarters. Apple has refuse to pay technology licensing fees to Qualcomm until courts decide on who owns want.  China could also block its proposed acquisition of NXP Semiconductors $NXPI. On Thursday, China’s Ministry of Commerce gave a negative preliminary review of the Qualcomm-NXP deal. If politics dominate then after the U.S. stopping Broadcom there is a likely tit for tat at play.

Intel $INTC Reports on Thursday 

Analysts expect Intel to earn 72 cents a share, up 9%, on revenue of $15.05 billion, up 2%  in the first quarter. 

Intel’s focus in the conference call on data center, cloud, self-driving car and Internet of Things (IoT) are the key growth drivers for the first quarter guidance. Management had expected data grow the mid-teens range, consensus for Data Center Group (“DCG”) currently stands at $4.82 billion higher than $4.23 billion in the year-ago quarter. While PC segments to decline in low-single digits. $INTC is also expected to benefit from strength in on-premise and hybrid cloud build-outs.

Intel’s acquisition of MobilEye enables it to offer a wide range for self-driving vehicles, cameras, in-car networking, sensor-chips, roadway mapping, cloud software, machine learning and data management. Intel is now in a position to compete with NVidia in the autonomous car technology market. Intel has also been a long-time supplier to Alphabet’s Waymo division and has partnerships with BMW, Nissan, Volkswagen AG, and Ferrari. 

More Chips Reporting This Week

Other semicondoctors to watch reporting earnings this week include MKS Instruments $MKSI on Tuesday and Entegris $ENTG on Thursday.

Taiwan Semiconductor Manufacturing $TSM and Lam Research $LRCX Cautious Outlooks Weigh on $SOX.

The chip earnings after after heavy selling took hold last week after cautious reports from chipmaker Taiwan Semiconductor Manufacturing $TSM and semiconductor equipment supplier Lam Research $LRCX.

Analysts have been out saying the semi conductor segements have topped out. Taiwan Semiconductor is the world’s largest contract chipmaker adding weight to the sector selloff. $TSM on Thursday lowered its target for sales growth in the global semiconductor industry to 5% in 2018, down from its prior outlook for 5% to 7% growth.

$TSM said the sales weakness was mostly due to the smartphone sector and in particular Apple $AAPL. Taiwan were upbeat on sector growth in automotive, Internet of Things and data centers. Lam Research makes wafer fabrication equipment for the semiconductor industry andreported a disappointing outlook late Tuesday for chip-gear shipments for the rest of 2018. 

The $TSM announcement saw the the Philadelphia Semiconductor Index $SOX fall 4.3%. The move was the biggest one- drop in the $SOX, since Feb. 8 . It was also and only the 10th time in the past eight years the index fell more than 4%. The iShares PHLX Semiconductor ETF $SOXX fell 1.2% on the Friday as the sector saw no dead cat bounce. 

Needham analyst Rajvindra Gill said in a report Friday that the broad sell-off in the chip sector was not justified. Smart operators say the downgrade by $TSM was one of caution with the uncertainty from trade tariffs on China.

Bearish Note on Chips From Bank of America Merrill Lynch

Analyst Vivek Arya at BAML on Friday stated chip stocks could fall 4% to 7% more from here. He said softer earnings, trade fights and market volatility have “soured the mood”.

Arya cut his price targets on chip stocks with heavy exposure to Apple’s iPhone business, including Broadcom $AVGO, Cirrus Logic $CRUS and Skyworks Solutions $SWKS. 

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