By Larry Gellar
PowerShares QQQ (QQQ) was up over 1% on Wednesday, as the situation in Europe appears to be slowly improving. Here are 5 stocks that helped contribute:
Sirius XM Radio Inc. (SIRI) was up over 7% on Wednesday, as the company announced a slew of good news. Expectations for the rest of the year remained the same, and the company also gave insights into what 2012 might look like. A price increase on the basic Sirius XM plan is also being introduced. Overall, CEO Mel Karmazin was pretty bullish, saying that the company will provide “the best and most diverse programming in radio available to our subscribers in cars, homes, offices, business establishments, on the Internet and smartphones.” He also said, “We will expand our programming and technology further with the launch of SiriusXM 2.0 in the coming months.” For all the diehard SIRI shareholders and Sirius XM users out there, this was a pretty exciting statement. While long-term fundamentals for SIRI should certainly be revised upward, some traders believe there aren’t many short-term gains to be made from the price change news. Specifically, the subscription price change may have already been built into the stock price. Pandora (P) remains Sirius XM’s biggest competition, although that company hasn’t proven it can be profitable yet. Regardless, it is trading at 8.11 times sales, whereas SIRI is trading at 2.16 times sales. Margins for SIRI are also pretty strong: gross margin is 61.79% and operating margin is 21.01%.
Cisco Systems, Inc. (CSCO) was about flat on Wednesday, although some new remarks from CEO John Chambers have many shareholders revved up. Perhaps his feistiest quote was, “You’re going to see us go after Juniper (JNPR). Juniper is the most vulnerable I’ve ever seen…You’re going to see us go after H-P (HPQ). Strategy is really hurting there.” Interestingly, this comes after Cisco recently retooled its own strategy, which many are now claiming as a resounding success. Specifically, the company was focused on trimming its fat and becoming less bureaucratic. If there is one company that has Chambers worried though, it’s Huawei Technologies, a company based in China. Said Chambers, “Huawei is going to be a very tough long-term competitor…Take them on in their home market. You have to. You can’t let them make all the profits in China, and then go against you with no profits in the rest of the world.” Cisco also gave some new long-term forecasts at its presentation yesterday, although many analysts simply reaffirmed their ratings on the stock. Aside from Juniper, Hewlett-Packard (HPQ), and Huawei, Alcatel-Lucent (ALU) is another important competitor for Cisco. ALU offers a much lower price to sales ratio, although price to earnings and price/earnings to growth are a bit higher than CSCO.
Micron Technology, Inc. (MU) had a big day, up over 6%. This can in part be attributed to struggles that competitor Elpida (OTC:ELPDF) is experiencing. In fact, that company has struggled mightly due to the strength of the yen. As explained by a statement put out by Elpida: “We have decided on an emergency response because of record yen levels and the quickly worsening market for our main DRAM product.” This emergency response is the possibility that some of the company’s production will be shifted to a Taiwanese subsidiary Rexchip Electronics Corp. Aside from the Elpida news though, semiconductor stocks have been quite strong lately. It all started back when Nvidia (NVDA) reported great earnings, and now the question is when this uptrend will slow down. As for value metrics, price to earnings for MU is 11.39, price/earnings to growth is 1.82, and price to sales is 0.75. Gross margin is 24.26% and operating margin is 12.82%. As for cash flows, the company brought in $1.428 billion for fiscal year 2010 but had $518 million stream out in the 9 months after that. Micron Technology has also been involved in some nasty litigation with Rambus (RMBS) and Hynix, so investors should definitely keep an eye on that.
Microsoft Corporation (MSFT) was up nearly 2% on Wednesday, although the company’s recent analyst conference was rather quiet. Many hoped that analysts would ask Microsoft about a share price that has declined significantly over the past decade or the mountain of cash it sits on. On the other hand, the point has been made that much of Microsoft’s cash is overseas right now, making it more difficult to redistribute as a dividend. Microsoft also didn’t respond to recent remarks by David Einhorn, in which he demanded the company sell its Bing unit. Some investors are also disgruntled with the company’s smartphone business, although optimistic shareholders believe this division will improve with time. Microsoft’s financial decisions in particular come under fire. Here is a letter from one anonymous hedge fund manager that has gained quite a bit of popularity lately. Specifically, the letter calls for a significant increase in debt that would be used to buy back shares as well as a much higher dividend. This dividend would presumably be financed by 100% of Microsoft’s domestic cash flows. Apple (AAPL), Google (GOOG), and Oracle (ORCL) remain important competitors for Microsoft. Note that these companies all have higher price-to-earnings and price-to-sales ratios than MSFT. Margins for MSFT remain strong though: gross margin is 77.73% and operating margin is 39.31%.
Intel Corporation (INTC) was up nearly 2% on Wednesday, as the company announced specifics of some notes it is issuing. That money will be used to buy back stock as well as some general purposes. Investors are also excited about this company’s newest solid-state drive. The details can be found here, and Intel’s general manager for Non-volatile Memory Solutions had this to say: “Our latest SSD product family offers more than 30 times the write endurance of our current MLC SSDs, plus improved performance and new features, such as power-loss data protection and surplus arrays of NAND for enhanced reliability.” On the other hand, many investors fear that new products from Advanced Micro Devices (AMD) could hurt Intel’s ability to succeed in the notebook market. In fact, AMD’s specialty as a maker of cheaper chips is only getting stronger. Aside from AMD and Intel, Texas Instruments (TXN) is another player in the semiconductor market. That company has higher price to earnings and price/earnings to growth than Intel, although it’s a bit cheaper using price to sales. Intel margins remain quite strong: gross margin is 63% and operating margin is 33.55%. As for cash flows, the company brought in $1.511 billion during 2010, but had $863 million flow out in the 6 months after that.