by Larry Gellar
Let’s take a look at the 5 Nasdaq (QQQ) stocks that saw the most trading yesterday. Why is everyone trying to get in on the action? As always, please use my research as a starting point for your own due diligence.
Just when many investors were getting worried about technology, Intel Corporation (INTC) put out some rather exciting forecasts. That has the stock up, and Intel is benefiting hugely from its business in the emerging markets. In fact, chief financial officer Stacy Smith recently said, “The emerging markets, as the technology we sell becomes more affordable, are generating significant growth.” The most lucrative products there are turning out to be notebook computers, although other pieces of hardware are also an important part of the story. Server chips are doing well also, while the phone and tablet businesses have struggled a bit. Interestingly, this comes at a time when smartphone growth is skyrocketing and personal computers are slowing down some.
As for the actual earnings that were reported, Intel was able to beat analyst estimates by 8 cents per share. Important competitors include Advanced Micro Devices (AMD) and Texas Instruments (TXN). Intel has the highest price to sales ratio but also the lowest price/earnings to growth ratio. Additionally, its margins are quite strong, with gross margin at 63% and operating margin at 33.55%. Furthermore, Charter Equity recently upgraded the stock from Market Perform to Buy. Dividend yield is 3.6% and beta is 0.97. (Click here for earnings call transcript)
Yahoo! Inc. (YHOO) has been up on more talks of an acquisition, although co-founder Jerry Yang just said that the company is not necessarily up for sale. While that may be a ploy to throw people off, it’s pretty clear that there are several possibilities. Microsoft (MSFT), as well as a variety of private equity firms are interested in the company, and there are now reports that the two sets of force may team up to put in a bid. Yahoo doesn’t like that very much though, and the company’s advisers (Goldman Sachs (GS) and Allen & Co) are telling bidders to not share information. The idea here is to keep competition strong for Yahoo, but it's also turning off many of the interested parties. Another player in all of this is Jack Ma, CEO of Alibaba. In fact, he has been the most consistently outspoken of the potential bidders thus far.
In other news, Yahoo was able to beat analyst estimates for its earnings, although net income was still lower than a year ago. Important competitors for Yahoo include AOL (AOL) and Google (GOOG). Yahoo falls in the middle of those two companies for price to earnings, price/earnings to growth, price to sales, operating margin, and gross margin.
Microsoft Corporation (MSFT) has been up and down lately, although many investors are getting excited about the company’s smartphone business. While the Windows Phone currently has a very small market share, Microsoft is teaming up with Nokia (NOK) and Samsung (OTC:SSNLF) to get more phones on the market. This could be an opportune time as it remains to be seen how Google’s acquisition of Motorola Mobility (MMI) works out. In fact, Steve Ballmer recently had some interesting things to say about Android. One statement was “You don't have to be a computer scientist to use a Microsoft phone, you do for an Android phone” and another was “The cheapest phones on the market will be Android -- the rock bottom cheapest. It's hard for me to be excited about Android phones.”
Microsoft shareholders are also eager for more information about how the company’s PC software business is doing. In fact, lowered demand for personal computers could hurt Microsoft’s ability to sell new copies of Windows. Generally speaking, important competitors for Microsoft include Apple (AAPL), Google, and Oracle (ORCL). Those stocks are more expensive using price to earnings and price to sales but less expensive when looking at price/earnings to growth. Meanwhile, Microsoft has the best margins – those are 77.73% gross and 39.31% operating.
A rare disappointing earnings report from Apple Inc. has sent the stock plummeting. The company is also hurting from the loss of Steve Jobs, and a memorial was recently held in which Apple stores closed down and employees could watch a live webcast. As for the earnings report, the results were great in many ways – net income nearly hit a new record, surprising considering the current economic climate. Analyst expectations weren’t met, but in yet another surprising move, outlook for the next quarter was quite optimistic. This is particularly interesting because Apple tends to be conservative in its outlook, although perhaps the company couldn’t hold back in what should be a holiday season full of iPods, iPads, and iPhones. Some investors have also noted that the past quarter may have been a bit weak because news of the next iPhone got out a bit early. Theoretically, that may have slowed sales as consumers waited for the new version to come out. Important competitors for Apple include Google, Hewlett-Packard (HPQ), and Research In Motion (RIMM). AAPL falls in the middle of those stocks for a variety of measures including price to earnings, price/earnings to growth, price to sales, operating margin, and gross margin.
Cisco Systems (CSCO) has been up and down lately, and many investors have turned special attention to a recent SEC filing detailing the company’s pay procedures. Specifically, John Chambers, not the most popular CEO on Wall Street, had his pay cut significantly. Here’s what the filing said: “…the compensation committee exercised its negative discretion and determined that no named executive officer would receive a cash incentive award or a performance-based equity award for fiscal 2011.”
In other news, ISI Group has begun coverage of Cisco Systems, rating the company a Buy. Not all of Wall Street’s other analyst firms are that bullish, however. Also of interest is a deal between Cisco and the U.S. Agency for International Development. Russia is the targeted area, and government officials hope that Cisco can further increase that country’s use of technology. Investors are also excited about the company’s newest virtualization software, which includes a partnership with Citrix (CTXS). This should allow Cisco to keep its products well integrated with other important technologies. Cisco’s biggest competitors include Alcatel-Lucent (ALU) and Juniper Networks (JNPR). Cisco has the highest price/earnings to growth, while price to earnings and price to sales are about average. Operating margin is very strong at 20.13% and gross margin is decent too at 61.69%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.