Analysts scrambled to revise target prices for a number of companies between February 1, and February 3. The technology stocks seeing high activity in recent days are as follows:
Feb 3 2012 Target Price
Feb 7 Close
Difference From Target
Electronic Arts Inc
Electronic Arts (EA) is in the lead as the technology stock trading well below target. EA closed at $18.49, 23.5% below target. Investors initially bid up shares $1.50 to $20 on February 2, after the company reported its quarterly earnings. The initial euphoria for social media stocks is causing investors to stay with Zynga (ZNGA), LinkedIn (LNKD), and Groupon (GRPN). These stocks are up around 25%, 20%, and 5% respectively.
In EA's quarterly results, the company reported in Q3:
- Moving an important game launch from Q4 F'12 to Q1 F'13
- Concern with the financial condition of one of EA's major European retail partners
- Over 100M non-GAAP revenue from Origin (its direct-to-consumer digital service)
- GAAP revenue of $1.061B
- GAAP EPS loss of $0.62
- Lowered GAAP EPS guidance to $0.10 to $0.20 for Q4
Investors failed to reward EA for its positioning for social media. This is a mistake. The company successfully leveraged its Sims brand to Sims Social. EA said that it has over 4M daily active users, and 21.7M monthly active users. In the mobile space, EA grew its handheld digital revenue a meaningful 84M (up 25%).
EA will be launching "Mass Effect 3" on March 6 in North America.
After dropping nearly $1 on February 2, to close at $12.20, JDS Uniphase (JDSU) rallied to $13.25. JDU is now trading at 16.6% below its target price. The stock moved wildly after the company reported earnings. To summarize, the company reported:
- 2nd-quarter revenue of 413.1M
- Operating margin of 9.6%
- Book-to-bill ratio above 1
- Positive operating cash flow of over $45M
- Gross margin drop to 46.8% from 47.3%
- Net income of $0.15, compared to $0.29 from a year earlier
JDS forecast lower margins for the 3rd quarter, down at between 6% - 7.5%. 2012 is a "show-me" year for JDS. In the CCOP segment, the company will need to generate revenue above $190M to achieve an operating margin of between 16% and 20%. The company will hold an Analyst day on February 16.
In the semiconductor space, Advanced Micro Devices (AMD) is trading above its target price. Analysts thought AMD is worth $6.94, 2.7% below its closing price. Unsurprisingly, some analysts started to raise the target price for AMD. After the market closed, AMD said that its head of sales was leaving the company.
AMD should be trading at higher levels. Over the past two years, S&P noted that the company delivered more stable levels of profitability.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EA over the next 72 hours.