Tech earnings boost Nasdaq
Sun and Sybase lead the way as the tech-heavy Nasdaq is again trading above records levels.
Despite the continuing financial crisis in Asia, Sun beat Wall Street expectations by two cents, posting profits of $288 million, or 73 cents per share. Sun shares, which have traded as high as 53.3125 and as low as 30.375 during the past 52 weeks, closed up more than 4 percent at 52 today.
Investment bank BT Alex Brown upgraded its recommendation on Sun today to "buy" from "market perform," while Lehman Brothers raised its price target on the company to $60 a share from $55 a share. Lehman also increased its fiscal year 1999 earnings estimates to $2.70 from $2.65 a share.
And for the first time in months, Sybase posted a slim profit while analysts expected a loss. The relational database maker's shares closed up nearly 12 percent today at 10.0625. During the past year, the stock has traded as high as 23.625 and as low as 6.125.
First Albany maintained its "buy" rating on Sybase today, and raised its third-quarter earnings estimates on the company to two cents a share, up from an expected loss of seven cents.
The Nasdaq broke its record high for the eighth straight session, finishing the day at 2,008.76, up 8.20 over yesterday's close, which marked the first time the index closed above 2,000. The index has never produced more than ten consecutive record closes. The Nasdaq has been on a steady climb since January, when it hovered between 1,500 and 1,600.
Despite the record-level numbers for both the Nasdaq and the Dow Jones Industrial Average, which closed at a new high of 9,337.98, some industry observers remain cautious.
Chuck Hill, director of research for First Call, said that while the outlook for the software industry is strong, things are not rosy across the board for the high-tech sector.
"We've seen substantial downward revisions in the first and second quarters [in the semiconductor, communications equipment, and computer market segments]," Hill said. "There were already some capacity demand imbalances in the semiconductor industry and inventory problems with computers, but those situations were exacerbated by the Asia situation," he said.
"And the outlook is not that great going forward," he added.
Hill said that only a handful of companies, including Dell, Gateway, Cisco Systems, and Lucent Technologies, are performing well despite Asia, and that they also top the Nasdaq market.
"The top five companies make up more than half the market cap [of the Nasdaq]," Hill said. "Its [record highs are] mainly being driven by these big cap companies."
Still others say the future is bright for the technology sector, which appears to have weathered the worst of Asia's woes.
"We had all expected this to be a tough quarter [in the PC and hardware sectors] and the results are coming through a little better than expected," said Philip Rueppel, technology analyst for BT Alex Brown. "I think there's a little bit of a collective thought that perhaps the worst is over in terms of Asia and other macro issues."
Some analysts have said the large jumps in certain technology stock prices this summer came as investors anticipated strong earnings from the Internet and high-tech sectors.
Apple surprised investors Wednesday with strong earnings, while Microsoft, another Nasdaq stock, yesterday beat the Wall Street consensus by two cents a share.
Both companies' shares have eclipsed 52-week highs in recent days. Microsoft finished up less than 1 percent at 117.9375. Apple, however, was off nearly 2 percent at 36.875.
Also today, BancAmerica Robertson Stephens raised its first-quarter 1999 earnings estimates on Microsoft to 49 cents a share, up from 46 cents, while investment bank Donaldson, Lufkin & Jenrette upped its price target on the company to $150 a share.
Lehman Brothers maintained its "buy" recommendation on the software titan and hiked its 12-month price target to $140 a share, up from $125.
Other companies that released financial results yesterday include Internet directory Excite, search engine provider Inktomi, and removable storage supplier Iomega. Shares in Excite and Inktomi were down slightly today, while Iomega closed even on the day. All three companies posted losses.
Lehman Brothers downgraded its Excite recommendation today to "neutral" from "outperform."