This Chip Action Is Stunning

 | Jan 19, 2012 | 2:00 PM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:






On Wednesday, analog chipmaker Linear Technology (LLTC) and programmable-chip powerhouse Xlinix (XLNX) released upbeat results that set off a huge semiconductor rally. Investors scrambled to get in on the action. The sector, which had been left in a lurch since the August floods in Taiwan, roared back to life as both companies said their December results were boosted by stronger demand. Upbeat forecasts for the March quarter had investors dancing in the streets.

Even slumbering giant Texas Instruments (TXN) had its best single day since 2008, jumping 8.5%. Holy cow -- is this the start of some new fantastic trend or just a one-day wonder?

If you go back to mid October, Linear Technology just barely made the low end of first fiscal 2012 estimates. Then, on the conference call, management offered an outlook for the December quarter that was much worse than expected. The company guided revenue down -- between a drop of 9% and 13%. (The Street was expecting a down quarter, but not that bad.)

But it wasn't long afterward that the stock picked up steam as investors thought the worst was over. The shares climbed about 3 points. Since then, it's been a rollercoaster of emotions -- up, down, left, right. Now, the stock is back to its November highs.

For the second quarter, Linear reported revenue of $294.3 million, a decrease of 11% from the previous quarter and a 23% drop from the same period a year ago. Net income sank 19% sequentially and 39% year over year. While the results fell within management's estimates, guidance was upbeat. The company believes revenues will jump between 4% and 8% above second-quarter revenue of $294 million.

I'm cautiously optimistic regarding chip demand, especially when it comes to communications semi names. Instead of buying any of these stocks after a big one-day jump, I would wait. You always get another shot at it. Linear Tech did very well last year, growing revenue by more than 27% in a difficult economy. With an improving environment, it could be time to dial in here.

Columnist Conversations

today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
View Chart »  View in New Window »



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.