277.75 +1.24 (0.45%)
After hours: 7:52PM EDT
|Bid||277.00 x 800|
|Ask||278.99 x 900|
|Day's Range||276.02 - 282.88|
|52 Week Range||197.46 - 323.20|
|Beta (3Y Monthly)||0.64|
|PE Ratio (TTM)||36.91|
|Earnings Date||Sep 4, 2019 - Sep 9, 2019|
|Forward Dividend & Yield||10.60 (3.80%)|
|1y Target Est||316.61|
(Bloomberg Opinion) -- Ten months ago, I warned that storm clouds were brewing over the global technology industry. The situation today is much worse.Back then, a U.S.-China trade war was more risk than reality, Apple Inc.’s pending iPhone update held promise, and central banks were still in tightening mode. Yet inventories at the end of June 2018 had climbed to the highest since the financial crisis a decade earlier and a sector-wide slowdown was looming.At the time, the Pollyannas were louder than the Chicken Littles. The next iPhone had yet to launch and Christmas shopping season was coming, argued the optimists.Since then, global technology companies have issued loud warnings about lost sales due to U.S. actions against Huawei Technologies Inc. In short, because the U.S. is restricting what can be sold to the Chinese giant, the company and its suppliers are cutting orders. This is causing a ripple effect from semiconductor materials supplier IQE Plc to chip designer Broadcom Inc.But there’s something you need to know about the Huawei effect: It isn’t the cause of this technology recession. If anything, the company is the reason why the situation didn’t worsen earlier. The U.S. war on Huawei propped up the tech sector, notably semiconductors, over the past year.Let me explain. Immediately after the Trump administration in May blacklisted Huawei from buying U.S. components, Bloomberg News reported that the maker of telecommunications equipment and smartphones had been been stockpiling components in anticipation of some kind of action. Chairman Ren Zhengfei saw his own storm brewing and started saving for the rainy day that came on May 17.This tells us that some proportion of global component demand over the past year wasn’t led by end-product sales, but merely by shelf-stocking. More significantly, what revenue component makers did see was probably a false signal, pointing to demand that didn’t exist.These suspicions were confirmed earlier this month when Mark Liu, chairman of made-to-order chipmaker Taiwan Semiconductor Manufacturing Co., told me that he wasn’t sure how much of his company's recent revenue had gone to supplying Huawei’s end-product demand versus building the Chinese company’s inventory. Almost every technology company is a client of TSMC. If Liu, who has the broadest and deepest picture of the global tech sector, can’t make out the difference between demand and inventory build, then you can be sure he’s not alone.There’s also solid data to show the scale of Huawei’s stockpiling. Total inventories climbed 33% last year. Its stash of components – measured as raw materials and works in progress – jumped 76%. At even its most optimistic, there’s no way that Huawei expected 76% revenue growth this year.Which brings us back to the sector as a whole.Here’s an update of the numbers compiled 10 months ago, based on nine leading technology hardware companies and charted by my colleague Elaine He. The results aren’t heartening:With few exceptions, inventories – measured in dollar terms or days outstanding – climbed since June 30, 2018, and were unequivocally higher than two years ago. The revenue slowdowns that have affected every corner of the hardware sector this year make this buildup ominous. Of even greater concern are data pointing to prolonged cash conversion cycles, a measure of how long companies take to turn manufactured goods into money. The only firm to see a solid dip is Apple, and that’s because it tends to generate revenue from customers before having to pay suppliers. Both TSMC and iPhone assembler Hon Hai Precision Industry Co. (aka Foxconn) have said they hold inventory on their books for their key client. Were it not for that fact, Apple’s rising inventory days outstanding would probably be even higher.A major reason for Hon Hai posting weak earnings in the first quarter was inventory provisions. Those can be reversed if products sitting on shelves get sold to consumers, Hon Hai CFO David Huang told me this month. But shipping an already-made device to meet demand means you don’t need to manufacture a new phone, which in turn means no need to buy components from suppliers, and so forth.That’s the situation we’re in now: plenty of inventory, false signals from the Huawei effect, and a pending global economic slowdown that’s likely to suppress demand. If that doesn’t make make you worry about the state of global technology hardware, then I applaud your optimism. To contact the author of this story: Tim Culpan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
FedEx (FDX) beat bottom-line estimates by 20 cents per share, while semiconductor major Micron (MU) posted an even bigger beat to $1.05 per share.
FedEx (FDX) beating bottom-line estimates by 20 cents per share, while semiconductor major Micron (MU) missed the Zacks consensus by 4 cents per share.
Last week, the S&P 500 (SPY) rose to a record high. Last week, Trump tweeted, “Since Election Day 2016, Stocks up almost 50%, Stocks gained 9.2 Trillion Dollars in value, and more than 5,000,000 new jobs added to the Economy.”
The stock market is very volatile due to the US-China trade war, and semiconductor stocks have been showing sharp price movements. Wall Street analysts are optimistic on Broadcom (AVGO) despite a weak full-year fiscal 2019 revenue guidance. Analysts have a median price target of $310 for Broadcom, reflecting an upside of 12% from the current trading price.
US President Donald Trump is reportedly considering imposing a requirement that 5G equipment used in the United States must be manufactured outside China. Just last month, Trump barred Huawei from doing business with US companies without prior approval.
Broadcom’s (AVGO) stock fell 5.6% a day after it released its fiscal 2019 second-quarter earnings in which it cut its full-year fiscal 2019 revenue guidance by 7%, or $2 billion.
The US-China trade war accelerated in May as the two countries hiked tariff rates and the US banned firms from doing business with Huawei, one of the biggest customers of the tech industry. In May, the WSTS lowered its November 2018 estimate of a 3% YoY decline in global semiconductor revenue in 2019 to 12%.
Fiscal 2019 has been an interesting year for Broadcom (AVGO). Its revenue has fallen due to weak demand in the wireless communications market, but its profit margins have risen due to declining costs. While Broadcom is succeeding in improving its margins, profit is falling in dollar terms because of declining revenue.
Wall Street was set to open lower on Friday as rising tensions between the United States and Iran kept investors on edge, taking the shine off a rally in the prior session that pushed the S&P 500 to a record high. Tehran had received a message from President Donald Trump, delivered through Oman overnight, warning that a U.S. attack was imminent but adding he was against war and wanted talks, Iranian officials told Reuters on Friday. The New York Times had earlier reported that Trump had approved military strikes against Iran in retaliation for the downing of a U.S. surveillance drone but called off the attacks at the last minute.
Over the years, Broadcom (AVGO) has grown through acquisitions, which has helped it increase cash flows and profits. This strategy will help it maintain its profits even in the semiconductor downturn. However, these acquisitions also increased its leverage. At the end of the second quarter of fiscal 2019, Broadcom had $5.3 billion in cash reserves and $37.5 billion in total debt, resulting in net debt of $32.2 billion.
Broadcom’s (AVGO) business strategy revolves around acquiring high cash flow companies to increase its cash flows in order to return more value to shareholders. By integrating CA Technologies, Broadcom increased its operating cash flow by 15%, or $350 million, YoY to $2.67 billion in the second quarter of fiscal 2019.
The BAML survey highlighted the fact that investors are very bearish on growth expectations. A net 50% of the respondents expect global growth to weaken over the next 12 months. A record number of investors said that the global economy was in the late cycle.
Broadcom (AVGO) CEO Hock Tan is known for his expertise in growing through mergers and acquisitions. His strategy is to acquire companies that are market leaders with high cash flow and deliver strong returns to shareholders.
In Bank of America Merrill Lynch’s June 2019 survey, the trade war remained the top risk cited by 56% of the respondents. Since Trump’s tweet on May 5, trade tensions have only revived with China retaliating in kind. Time and again, Trump has also talked about bringing another $300 billion worth of Chinese imports under tariffs.
Broadcom’s (AVGO) fiscal 2019 second-quarter earnings were in the spotlight last week, as the company slashed its full-year revenue guidance due to the US-China trade war and the Huawei ban. The guidance pulled down semiconductor stocks and dampened hopes for a recovery in the second half of the year.
Broadcom (AVGO) stock gives a glimpse of the health of semiconductor stocks. It moves in tandem with the VanEck Vectors Semiconductor ETF (SMH). Semiconductor stocks rose in the first four months of 2019 over the anticipation of growth in the second half.
US equity markets rallied yesterday, and the S&P 500 (SPY) gained almost 1.0%. Markets have now largely recouped their May losses. Along with the dovish stance taken by European Central Bank President Mario Draghi, positive comments on US-China trade talks lifted markets yesterday.
When Donald Trump was elected as the US President in 2016, we saw a sharp rally in some stocks, especially in the metals and mining space. Trump’s pro-growth policies and trillion-dollar infrastructure plans were expected to lift US metal consumption.
If the Fed doesn't signal significant easing ahead, the markets could nosedive. Many analysts agree that the markets might be overpricing the Fed's rate cuts this year.
The Zacks Analyst Blog Highlights: Broadcom, Amgen, NVIDIA, Bristol-Myers and Restaurant Brands
Broadcom (AVGO) slashed its full-year fiscal 2019 revenue guidance for its Semiconductor Solutions segment by 10%, or $2 billion, dampening hopes of a revival in the second half. However, the company experienced strong demand in its networking business and expects revenue in this segment to grow in the double digits in fiscal 2019.
US markets rose sharply yesterday, and the NASDAQ Composite (QQQ) rose 1.4%. Semiconductor stocks were among the biggest gainers. NVIDIA (NVDA), Advanced Micro Devices (AMD), Broadcom (AVGO), and Intel (INTC) rose 5.4%, 4.3%, 4.5%, and 2.7%, respectively.
Broadcom’s (AVGO) broad portfolio across the communications and networking markets makes it a barometer for the health of the semiconductor industry. The company’s recent guidance cut slashed the chip industry's hopes of a second-half demand recovery amid the Huawei ban.