Tuesday, September 26, 2006
Sector Spotlight: Semiconductors
Today, the markets look strong, as the consumer (via the consumer confidence index) appears to be in good spirits. As a result, we are seeing a broad rally, led by Homebuilder and Transport stocks. The only notable weakness is found in the SOX. However, after such a big run up yesterday, a little pullback should not worry the bulls.
For now, I intend on throwing food stuffs at my computer screen and throwing my chair around the office, while torturing myself by watching CNBC.
The following Semiconductor stocks have mojo:
Rackable Systems: Concerns from Computerworld article overblown, Sept qtr on track, Dec looks even better- WR Hambrecht (28.47 ) : WR Hambrecht notes yesterday, shares of RACK were off as much at 7% from their intra-day highs only to rally back and close up 3% by the market close. They believe the downward pressure in RACK shares early in the day was driven by a recent ComputerWorld article suggesting that Google (GOOG) is experimenting with Sun Microsystems' (SUNW) open-source version of its Solaris operating system and the perceived competitive threat and potential lost business for RACK at Google. The firm reits, that 1) Google continues to build its own servers in house and will do so for the foreseeable future; 2) Google and RACK continue to have a good relationship; and 3) Google represents a potential avenue for growth in the storage server market. Furthermore, the firm believes RACK will meet or slightly beat Q3:06 consensus estimates and raise its Q4:06 guidance. With RACK shares currently trading at 21x our 2007 EPS estimate of $1.33 and with an expected growth rate of at least 25-30% for the next few years, they view current levels as an attractive entry point.
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