Novellus Slides On Weak Bookings Outlook

Late Wednesday, Novellus (NVLS) reported first quarter results that were slightly below Street expectations. That wasn’t good news; but what is really weighing on the shares is a disappointing order outlook for the second quarter.

On the conference call after the earnings report, the company said bookings in the current quarter would be down 10% to 20% sequentially, to a range of $330 million to $370 million. Mahesh Sanganeria, an analyst at RBC, wrote yesterday morning that he had expected a 5% decline in bookings.

Revenue is expected to be $410 to $420 million, which is actually above the Street consensus of $395.1 million. The company sees EPS of 42-45 cents GAAP, 45-48 cents pro forma. Shipments are expected to be up 13%-16% sequentially, to $440 million to $450 million. But the focus here is on the bookings, and not the income statement.

Robert Maire, an analyst at Needham, asserts that the company seems to be losing market share, and that rather than reflecting troubles in the overall semiconductor equipment sector, the weak bookings forecast results from issues that are Novellus specific.

Citigroup’s Timothy Arcuri contends that “nearly across the board share loss is now glaringly evident,” and adds that the lack of a stock buyback program “suggests to us that management may consider [the] stock overvalued.”

In a back-handed compliment, Pacific Crest’s Mark Bachman makes a similar point:

We continue to believe that NVLS shares are overvalued, and we applaud management for not using its cash to repurchase shares…until the company can demonstrate that it has the right technology solutions to improve its competitive position, we believe the shares will continue to trade lower, at which time share repurchases should be reconsidered.

Novellus yesterday was down $1.28 at $31.43.

NVLS 1-yr chart