Tuesday, June 13, 2006

Calls of Note Part 3

- JP Morgan comments on KLA-Tencor (NASDAQ:KLAC) after the co yesterday morning raised its F3Q06 (June) bookings guidance to the upper end of its guidance range of up 10%, plus or minus 10% ($615-$740mn). The company said order trends in the quarter have been very strong, driven by DRAM and NAND capex. Foundry bookings have continued strong, but the company sees logic bookings being lighter in the June quarter. The comments were made at a competitor investment conference.

Firm is leaving their F3Q06 bookings forecast unchanged at $720mn (up 17%). Their above-consensus revenue and pro forma EPS estimates are unchanged as well. However, they believe this upward order guidance revision will cause consensus estimates to rise.

Believes KLAC shares are very cheap and recommends buying here. The company's price-to-tangible-book multiple is the lowest in 6 years at 2.4x, and the shares are trading at just 12.5x our C2006 pro forma EPS estimate of $3.15, below group average of 14.0x.

Notablecalls: Raising booking guidance is hardly a surprise considering what AMAT and NVLS have said. I think KLAC is worth a shot around May lows. Repeating the Semi bounce theme.

- Bear Stearns is reducing their Q2 subscriber ests for XM Satellite (NASDAQ:XMSR). Firm is projecting 280k gross adds in the retail channel, down ~30% YoY from an estimated 384k in 2Q06, primarily due to the anemic demand in April and May, and product delays and shortage thereafter. Estimates 395k net adds in the quarter, down from 450k previously. Thinks advertising spending during the quarter will be significantly lower also. For the full year, the firm islowering their ending sub base estimate to 8.3 mn, from 8.5 mn previously, as they think the shortage likely will continue into 3Q06.

Believes that the negative sentiment around the stock likely will continue in the near-to-mid term as the company resolves several issues, including FCC and FTC inquiries, product shortage, stakeholder lawsuits, and most importantly, lack of demand. Sees floor value of shares around $4-$5. Maintains Underperform.

Notablecalls: Bear has been dead right on XMSR and I believe the shares have more downside.

No comments: