Market is negative on Intel-it is not new though. see the comments in bold.
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Intel, TI, Micron Outpace Market Decline on Mixed March Chip Stats
By Tiernan Ray
Chips stocks are outpacing the broader-market declines today as the Street contemplates sobering numbers from the Semiconductor Industry Association, after the organization yesterday reported sales in the month of March rose 6%, to $27.7 billion, which some analysts find disappointing, though not a disaster.
Shares of Intel (INTC) are down 58 cents, or 1.8%, at $32.61; Texas Instruments (TXN) shares are down $1.36, or 2.5%, at $53.94; Microchip Technology (MCHP) is down $1.12, or 2.3%, at $47.72; and shares of NXP Semiconductors (NXPI) are down $2.45, or 2.5%, at $97.68.
The SIA’s CEO, John Neuffer, was upbeat, noting the rise in sales comes “Despite macroeconomic challenges,” and despite and despite 2014 having been a record year for the industry.
The firm noted the uneven regional performance:
Regionally, sales were up compared to last month in Asia Pacific/All Other (3.1 percent), Europe (2.7 percent), and China (1.0 percent), which is broken out as a separate country in the sales data for the first time. Japan (-0.4 percent) and the Americas (-6.9 percent) both saw sales decrease compared to last month. Compared to March 2014, sales increased in the Americas (14.2 percent), China (13.3 percent), and Asia Pacific/All Other (3.8 percent), but decreased in Europe (-4.0 percent) and Japan (-9.6 percent).
Credit Suisse’s John Pitzer notes that on a month-over-month basis, sales were up 14% in March from February’s level, which was ” ~1,000 bps BELOW seasonal,” though he notes that “February revenue was ~40 bps ABOVE seasonal (-4.4% m/m versus seasonal of -4.8% m/m) and Jan was ~40 bps ABOVE seasonal (-8.7% m/m versus seasonal of -9.1% m/m).”
Pitzer focuses on the actual monthly sales, $29.8 billion, whereas the number SIA focusses on is the three-month average.
Pitzer notes prices were the culprit, with volume actually being better than is typical:
The m/m increase in revenue was driven primarily by units – however, the weakness relative to seasonal was driven by a weaker than seasonal decline in ASPs, which offset a stronger than seasonal increase in units. Specifically, units were +27.4% m/m (ABOVE seasonal of +19.8% m/m), and ASPs were -10.3% m/m (BELOW seasonal of +2.0% m/m). On a 3MMA basis, Mar revenue of $27.7bn, -0.1% m/m, was ~160 bps BELOW seasonal of +1.5% m/m driven by a weaker than seasonal decline in ASPs compounded by a weaker than seasonal increase in units – specifically, units were +1.9% m/m versus seasonal +2.5% m/m, and ASPs were -2.0% m/m versus seasonal of -1.2% m/m.
The outlook for the full year, notes Pitzer, is actually better than the Street is expecting:
For 2015, Semi revenue is tracking +5.4% y/y (+5.4% y/y ex- Memory). This compares to current bottoms-up Street estimates of +1.2% y/y (+1.7% y/y ex-Memory). Excluding INTC, Street estimates revenue of +1.8% y/y in 2015.
Tim Arcuri with Cowen & Co. notes that despite the below-seasonal March change from February, the full quarter was okay: “CQ1 semi sales overall fell 2% Q/Q – spot in-line w/5-yr seasonal and also in-line w/the 51 semi companies reporting thus far during earnings.”
Arcuri sees confirmation TI struggled in analog sales, but he sees the company bouncing back later this year:
During CQ1:15 TXN’s Analog segment slightly underperformed industry Analog growth as it fell 4% Q/Q vs. industry growth -3% Q/Q. Due to slightly less growth than the industry, likely from the negative impact that wireless infrastructure had on Analog, TXN lost 20bps of share in CQ1 (to 18.2%). Share has rolled off somewhat over the past 6 months, but TXN share is still up ~40bps Y/Y. We think TXN should resume market share gains beginning in CQ2 (target is 30-40bps gain/year) as its strong position in automotive/industrial end markets should benefit from a seasonal ramp in Q2.
Notes Arcuri, sales of analog chips were actually a stand-out positive, as were sales of NAND flash memory chips:
Analog outperformed all other subgroups both on an absolute basis and vs. seasonality as it rose 27% M/M (5-year seasonal +22%). This was the result of strong unit shipments (+38% M/M vs. seasonal +29%) and modest declines in ASPs. NAND flash performed in-line with seasonal (+19% M/ M) while DRAM, MPU and global IC ex memory all performed below 5-year seasonal.
Despite NAND’s strong showing, I would note shares of Micron Technology (MU) are down 69 cents, or 2.4%, at $27.99.
Chris Danely with Citigroup reviews the earnings season now drawing to a close, and reiterates a Buy rating on Texas Instruments, and on Microchip, though he’s somewhat concerned about a dip in GDP:
Now that 1Q15 earnings season is mostly complete, currency headwinds are negatively impacting the semiconductor sector a little worse than we expected, and we believe semis could experience an additional selloff. However, we remain constructive on the group as we believe the negative EPS revisions are mostly over […] Consensus 2015 EPS estimates for the group have declined 5% driven by currency headwinds, weak PC demand, and lower spending from the communications end market. […] We believe most of the EPS cuts are over, as exchange rates have stabilized and we believe demand should stabilize from the PC and communications end markets over the summer […] We expect demand back to normal in 3Q15. As long as exchange rates remain relatively stable, we believe FX adjustments should be completed in 2Q15 and demand will be back to normal by 3Q15 […] Our biggest fear is another cut to global GDP which we believe could cause a correction in the semiconductor sector similar to 2011 and 2012 when the SOX index declined 15%-20% from the peak.
One chip maker that still has further estimate cuts ahead of it is Intel, he thinks:
Intel requires roughly 17% revenue growth in 2H15 to achieve its 2015 revenue growth target of flat YoY. Since 2010, Intel has grown 2H revenue just 5% on average and has never had more than 8% revenue growth. We believe Intel is too bullish on its 2H outlook and guidance has to come down again.
