China has been a worry for investors in fiber optic stocks this year, and Stifel Nicolaus analyst Patrick Newton, who is generally very positive on names such as Lumentum Holdings (LITE), nevertheless cuts his price targets this morning on several of them, after digging into the details of China’s sluggishness. Newton, who has Buy ratings on Lumentum, on Finisar (FNSR), on Fabrinet (FN), and on Oclaro (OCLR), cuts his targets for all four, after detecting evidence of a slowdown that has persisted into this month. His target on Lumentum goes to $52 from $57; for Finisar, he drops it to $33 from $39; for Fabrinet, he cuts to $48 from $52; and for Oclaro, he’s now at $11 from $12. "Over the last several weeks we have made several checks into China in an attempt to discern the potential timing for the release of Chinese tenders associated with the anticipated 100G provincial builds,” writes Newton.
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Raymond James’s Simon Leopold today reiterates Buy ratings on multiple fiber optic names, including Finisar (FNSR) and Lumentum (LITE), writing that investors shouldn’t be overly concerned with the slow pace of deployment of the fastest optical connections in China. Although Leopold cuts his estimates because of China sluggishness, "the market has over-reacted in pressuring shares of optical component stocks,” he writes. Despite complications, writes Leopold, China has in past come through on its promises to build, and optical plans by the country’s government shouldn’t be any different:
China worry has spiked with concerns that new optical projects are delayed, not cancelled along with fears about inventory, OEM vertical integration and competition.
Analyst Jun Zhang of boutique research house Rosenblatt Securities today cut his rating on shares of wireless chip giant Qualcomm (QCOM), to Neutral from Buy, following its fiscal Q2 results yesterday, warning that the company’s market share of baseband modems in the next iPhone "will be down to 35% from 60%,” and that "gains in Chinese OEMs will not be enough to offset the 2H17 revenue decline from Apple.” Qualcomm is in a legal battle with Apple (AAPL) over royalties owed, saying the company has obstructed payment to Qualcomm of royalties by contract manufacturers who are under license to Qualcomm and who build the iPhone for Apple. Its Q3 outlook was weighed down by the prospect of further obstruction. Qualcomm started competing with Intel (INTC) for APple’s iPhone business with the latest model, the iPhone 7, which shipped in September of last year.
Shares of Apple (AAPL) supplier Qualcomm (QCOM), which is locked in a legal battle with Apple, are down 12 cents at $52.49, recuperating from the worst levels this morning, after the company yesterday afternoon reported fiscal Q2 results above expectations, but missed with its outlook for this quarter’s results, which reflect some uncertainty about what further obstruction, in the company’s view, may come from Apple. CEO Steve Mollenkopf and his team told me in an interview that "We have a strong track record of resolving these things,” referring to the legal battle with Apple. Price targets are being cut at numerous shops today, by both bull and bear. While bulls are upbeat about the company gaining share of baseband chips in China, and about the pending acquisition of NXP (NXPI), many expect the Apple situation to continue to weigh. On top of that, the Continue reading "Qualcomm Slips: Targets Cut as Apple Overshadows China, NXP Upside"
A long time ago I confessed that I like to read the IMF’s World Economic Outlook (WEO) from back to front. OK, I sometimes skip a few chapters. But I take particular interest in the IMF’s data tables (the World Economic Outlook electronic data set is also very well done, though sadly a bit lacking in balance of payments data).* And the data tables show the combined current account surplus of Europe and the manufacturing heavy parts of Asia—a surplus that reflects Asia’s excess savings and Europe’s relatively weak investment—remained quite big in 2016. China’s surplus dropped a bit in 2016, but that didn’t really bring down the total surplus of the major Asian manufacturing exporters. Much of the fall in China’s surplus was offset by a rise in Japan’s surplus. The WEO data tables suggest that net exports accounted for about half of Japan’s 1 percent 2016 growth—Japan
Continue reading "The Combined Surplus of Asia and Europe Stayed Big in 2016"
Here are some things going on today in your world of tech: Shares of Verizon Communications (VZ) are down 87 cents, or 1.8%, at $48.07 after the company this morning reported Q1 revenue of $29.8 billion and EPS of 95 cents, missing consensus for $30.4 billion and 96 cents. Wireless revenue in the quarter dropped 5%, the company said, amidst “continued promotional activity." Shares of Apple (AAPL) are up $1.02, or 0.7%, at $141.70, after a report by DigiTimes’s Cage Chao and Jessie Shen yesterday suggested the company has put in orders for parts for the next iPhone(s) in excess of 50 million units per quarter, citing multiple unnamed industry sources.