Today: Tech stocks bounce back after Friday’s global sell-off, as a busy week for earnings reports kicks off in Silicon Valley.
The Lead: Busy earnings week starts with gains in Silicon Valley
After a plunge at the end of last week, Silicon Valley tech stocks bounced back Monday as the busiest part of the region’s quarterly-earnings season began.
Stocks enjoyed a strong day across the board Monday, and the newly constituted SV150 jumped even higher, adding 1.5 percent before several companies announced earnings after the bell. Experts said that investors were betting on a strong earnings season for technology companies, after well-received reports last week from Santa Clara chipmaker Intel and Los Gatos video-on-demand firm Netflix, which were followed by a cheered report Monday morning from Israeli security company Check Point Software.
“People are thinking we’ve had three major tech companies do well, so maybe the others will do well also,” Donald Selkin, chief market strategist at National Securities, told Reuters. “The danger is that when stocks rally ahead of an event, the bar gets set higher and it sets things up for disappointments.”
Jeff Sica, CEO of Circle Squared Alternative Investments, agreed that Monday’s gains could get tossed in reverse if quarterly reports are not overly strong.
“These companies have to hit the cover off the ball,” Sica told Bloomberg News. “If they don’t do well, you might as well count the minutes until this bull market is over.”
Monday afternoon’s round of earnings reports were hit and miss, with five SV150 companies divulging results and heading in different directions after hours.
The biggest winner appeared to be Check Point rival Fortinet, as the Sunnyvale security company rose to record high prices after releasing its report, which showed profits of $1.6 million, or a penny a share, on sales of $212.9 million. The stock gained more than 8 percent in late trading, moving as high as $37.50 after closing with a 2.7 percent increase at $34.63.
“Cybersecurity demand is white hot and Fortinet has showed execution acumen in the field, a great recipe for success,” FBR Capital Markets analyst Daniel Ives said in an email after earnings hit.
Also gaining in late trading was Fremont’s Lam Research. The chip-equipment firm reported net income of $206.3 million, or $1.16 a share, on sales of $1.39 billion, and shares shot about 9 percent higher after gaining 1.9 percent to $71.99 in the regular session.
On the other side of the coin, Sanmina was slaughtered after reporting earnings of $14.7 million, or 17 cents a share, on sales of $1.53 billion. Shares slumped more than 11 percent after closing with a 1 percent increase at $23.36. Hayward chip-equipment firm Ultra Clean fell about 5.5 percent after reporting profits of 4 cents a share on sales of $125.3 million, and Sunnyvale chip firm Rambus lost less than 1 percent after earning 8 cents a share on sales of $72.9 million.
Bigger names are on the earnings horizon, starting with Yahoo on Tuesday, when CEO Marissa Mayer may discuss recent moves including an executive shake-up and a tweaked search deal with Microsoft. Mayer pleased investors last quarter by announcing a tax-free spinoff of the Sunnyvale company’s profits from the Alibaba initial public offering, but she faces pressure to start showing growth at the Web company through other means.
“For the stock to work post Alibaba stake spinoff, management needs to grow core Yahoo again, with a clear path that gets it closer to industry rates, something easier said than done,” Cantor Fitzgerald analyst Youssef Squali wrote in a note.
The two companies most responsible for Yahoo’s diminished presence in online advertising will follow with earnings reports later this week, with Facebook taking its turn Wednesday and Google on Thursday. VMware, eBay, SunPower, Pandora Media and Juniper will also take their turns this week, before Apple takes center stage on Monday, April 27.
Those larger companies were some of Monday’s biggest gainers. Facebook added 2.9 percent to $82.09 while plotting monetization strategies for WhatsApp, and rival Twitter gained 1.5 percent to $$51.40 while opening up direct messages to non-followers. After an excerpt from a forthcoming book showed that Tesla Motors was nearly sold to Google two years ago, Google added 2.2 percent to $544.43 ahead of “Mobilegeddon” while Tesla fell 0.7 percent to $205.27. As analysts continued to guess at Apple Watch sales and supplies, Apple added 2.3 percent to $127.60.
SV150 market report
Up: Facebook, Hewlett-Packard, Apple, EA, Google, Workday, Cisco, LinkedIn, Juniper, Salesforce, Twitter
Down: Advanced Micro Devices, VMware, Pandora, Tesla, Netflix, Gilead
The SV150 index of Silicon Valley’s largest tech companies: Up 25.98, or 1.5 percent, to 1,763.16
The tech-heavy Nasdaq composite index: Up 62.79, or 1.27 percent, to 4,994.6
The blue chip Dow Jones industrial average: Up 208.63, or 1.17 percent, to 18,034.93
And the widely watched Standard & Poor’s 500 index: Up 19.22, or 0.92 percent, to 2,100.4
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