Stocks in the news
Micron (MU) shares are up by 8% today after Samsung (SSNLF) announced production cuts over the weekend. Samsung's global presence is significant, boasting nearly $230 bln in revenue in FY22. If the company makes a meaningful cut to chip production, it should lead to a material reduction in global inventories as customers pull from existing stock. This should help speed up the ongoing recovery, restoring prices in the process. The main takeaway is that after Samsung decided to trim production, MU investors are becoming even more optimistic that market conditions have bottomed out, paving the way for a solid recovery during the back half of 2023.
Taiwan Semi (TSM) lower today after guiding Q1 revenue below analyst expectations. As the world's largest contract chipmaker, TSM serves a broad range of end-market applications with the vast majority of revenue from high performance computing (41% of 2022 revs), smartphones (39%), IoT (9%), automotive (5%), and consumer electronics (3%). Major customers include Apple, AMD, Broadcom, Intel, NVIDIA, and Qualcomm. The monthly sequential decline tells us that the quarter ended on a weak note, which is a bit troubling and not a great sign for TSM's customers as we head into earnings season.
WD-40 received a lowered FY23 (Aug) guidance which is causing shares to slip toward YTD lows of around $167. The company warned in October that sales during the first six months of FY23 would likely be disrupted by the unprecedented price hikes throughout 2022. After the company reaffirmed its FY23 outlook in early January, investors were relieved that revenue was tracking in line with WDFC's initially downbeat forecast. However, WDFC was not yet out of the woods. The price increases continued to weigh on sales volumes during Q2 (Feb), forcing management to conclude that a recovery would take much longer than initially expected. Although WDFC reduced its FY23 outlook, projecting EPS of $4.80-5.00, down from $5.09-5.24, and sales of $535-560 mln, down from $545-570 mln, management remained upbeat in achieving its 2025 revenue growth target of a mid-to-high single digits percentage.
On the other hand, Constellation Brands (STZ) is hopping slightly higher today after registering decent earnings upside and growing revs in line with consensus in Q4 (Feb). Also, the midpoint of STZ's FY24 adjusted EPS forecast was slightly higher than analysts' forecasts. STZ increased its quarterly dividend by 11%, giving it a solid 1.6% yield.
Lumentum (LITE) has cut its 3Q23 revenue guidance to $380-$384 mln from its original forecast of $430-$460 mln. The company disclosed that a network equipment manufacturer who represented more than 10% of its Q2 revenue will not be taking the shipments it had originally projected for Q3. Although LITE didn't disclose the specific customer that's not taking the shipments, it's believed to be communications networking company Ciena (CIEN), which is also selling off today. With the Q2 earnings season rapidly approaching, we wonder whether more warnings from the optical equipment and/or networking system industries will be forthcoming. On a positive note, LITE did bump its share repurchase authorization higher to an aggregate amount of $1.2 bln from its previously announced authorization of $1.0 bln. The increase reflects the company's confidence in its longer-term prospects and its belief that its shares are undervalued.