Don't look now, but the Philadelphia Semiconductor Index is
starting to show signs of life. It's up 6.5 percent since
November 16, after a 15 percent pullback between September and
October. The SOX outperformed Thursday, rising 1.1 percent to
378.63. It's back above its 200-day simple moving average (
) which brings a trip to its 50-day SMA around 390 into play.
Chip stocks got a lift Thursday after Broadcom (NYSE:
) raised its fourth quarter earnings guidance, citing upside in
mobile and wireless. It also lowered its outlook for operating
expenses. Investors also like news it would supply sample chips
supporting Long Term Evolution (LTE), a wireless technology being
adopted by wireless providers around the world. Shares popped 3.2
percent to $33.36 in heavy volume, a solid day of accumulation
for the chip designer.
Broadcom is a bellwether in the industry, but the stock is
still 16 percent from its 52-week high. Other names in the space
are still in the early stages of growth and closer to highs which
means there's better potential for outperformance in 2013.
Even though it's extended in price currently, ARM Holdings
) is one of the better-looking names in the chip space. It's a
U.K.-based chip designer with a strong presence in the smartphone
and tablet market. It licenses its technology to scads of
large-cap tech names, including Apple (Nasdaq:
). It has a market capitalization of $16.7 billion and it's
liquid with an average daily volume of 2.1 million shares.
Investors cheered its latest earnings report after the company
said earnings rose 29 percent from a year ago to $0.18 a share.
Sales growth accelerated sequentially, rising 24 percent to
$233.5 million. Full-year profit is seen rising 21 percent this
year (compared to 2011) and 23 percent in 2013.
For investors who missed the breakout over $29 when ARMH
gapped up on October 23, there will be another chance to buy it
-- patience for now because the stock needs to consolidate gains
for a bit before a new buy point emerges. A logical support area
for ARMH would be its 10-week moving average, currently around
$32.75. It may not get down that far, but watch for tight weekly
closes from here where the stock stays underneath its recent high
of $37.41. If this happens, a new upside breakout could take
Meanwhile, shares of chipmaker Cree (Nasdaq:
) remain under accumulation -- something that not too many
chipmakers can say at the moment. It's also impressive because
Deutsche Bank recently downgraded the stock to hold from buy. The
stock fell six percent on the news but found initial support at
its 20-day SMA. Shares rallies smartly on Thursday, up 3.1
percent to $32.70.
The company makes light emitting diode products, lighting
products and semiconductor products. After a period of sluggish
growth between fiscal 2010 and fiscal 2012, annual earnings
growth is expected to ramp up nicely over the next two years.
Fiscal 2013 earnings are seeing rising 26 percent (compared to
2012) with fiscal 2014 earnings up 39 percent.
Finally, Taiwan Semiconductor Manufacturing's (NYSE:
) relative price strength is tough to ignore as the calendar gets
ready to turn to 2013. It's another chip name under accumulation,
but after a recent technical breakout over $15.64, it's also
extended in price. Its 10-week moving average around $16 looks
like a solid support level.
Demand for the company's mobile integrated circuits remains
strong. In its latest reported quarter, earnings jumped 68
percent from a year ago to $0.32. Sales rose 38 percent to $4.8
For the fourth quarter, the consensus estimate calls for
earning of $0.27 a share, up 35 percent from a year ago with
sales up 28 percent to $4.4 billion.
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