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Micron beat on the top and bottom lines after the bell yesterday, with DRAM revenue up 16% q/q and 6% y/y.
Xilinx bumped up its fiscal Q1 revenue forecast to $720-734M from $660-720M, saying strength in the Wired and Wireless Group and Data Center Group more than offset coronavirus-related weakness in the consumer-oriented end market.
The iShares SOX Semiconductor Sector ETF (SOXX, +1%) is up slightly before hours. It holds Micron and Xilinx, but neither is a top 10 holding. Micron has a weighting of 3.98% and Xilinx is at 2.97%. Qualcomm (QCOM, +0.25%) is the top holding at 8.35%.
Chips have recovered from the pandemic plunge and then some. The SOXX is up 5.15% year to date vs. -5.5% for the S&P 500. It’s up more than 30% in the quarter. At about $264, it's only about $12 away from its 52-week high of $276.16.
Looking to momentum, SOXX shares are more than 12% above their 200-day moving average of $235.38.
Fundamentally, Micron sounded confident about the next six months.
The company’s chief business officer, Sumit Sadana, told Barron’s even the cheapest 5G phones will have double the amount of flash storage and DRAM than the 4G models. Sadana also said the rarer event of game console upgrades will see makers double DRAM as well.
“Gaming consoles are upgraded far less often in terms of the platform technology than smartphones and data centers,” Sadana said. “They have to future proof it – even if the software gets more sophisticated, they have to make the hardware last.”
Microsoft and Sony plan to release their next-gen consoles over the holiday period.
Meanwhile, KeyBanc said last week that chipmakers could see a tailwind in H2 from low supplies, despite limited visibility.
Consumer Staples are worth keeping an eye on this week and the news is positive so far.
General Mills and Constellation Brands report ahead of trading tomorrow.
Conagra pointed to at-home food consumption increasing due to stay-at-home measures, which could mean just a temporary bump for the food stocks. But Wells Fargo pointed out yesterday that rollbacks of reopening measures could mean “At-Home food spending may remain stronger, and for longer, than bears perceive.”
Shipping stocks will have a catalyst after the bell with FedEx issuing numbers. A 7.1% y/y drop in revenue and 67.7% drop in earnings are expected.
“Even with the huge (recent) rally, the stock is still in a long-term downward trend, a 50% rally wasn’t even enough to break it out of the trend,” Rick Pendergraft wrote on Seeking Alpha. There are too many negative factors on the stock currently, he added.