CHEESECAKE FACTORY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CAKE)") else Response.Write("(Nasdaq: CAKE)") end if %> gained $4 to $29 1/4 after reporting Q3 EPS of $0.26, up 62% over last year and $0.01 higher than the consensus estimate. The restauranteur known for its huge entrees and luscious desserts reported a delicious 7.3% gain in same-store sales for the quarter -- the 21st consecutive quarter of positive comparisons since the company went public in 1992. The company also announced that it had gained an exclusive foodservice contract for Disney's DisneyQuest "concept" in Orlando, with two units set to open by 1999. Cheesecake Factory expects to achieve its goal of increasing total restaurant productive square footage by 25% to 30% during 1997, and has set a similar goal for 1998. Sales per square foot are $838.94 for Cheesecake's 21 stores in operation (based on trailing sales of $193,293,458 and total square footage of 230,400). Assuming the company maintains its margins (with pre-opening expenses declining as a percent of sales) and hits its growth target, it could earn 1998 EPS of $1.24. With the mean EPS estimate for FY1998 at $1.15, it might be worth taking a closer look.
Excimer laser company CYMER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYMI)") else Response.Write("(Nasdaq: CYMI)") end if %> rose $1 21/32 to $28 1/16 on reporting third-quarter revenue of almost $57.5 million last night, roughly three times the company's sales of $18.2 million in the same period last year. Net income per share came in at $0.23, topping estimates of $0.21. The company quelled fears of a order push-outs by announcing that "[b]ased on our Sept. 30, 1997 backlog and significant orders received since the close of the third quarter, and on customer forecasts, we currently expect continued sequential revenue growth for at least the next two quarters." Skittish investors dumped the stock at the end of last month on fears that a massive production ramp-up (to accommodate an industry-wide shift to 0.25-micron chips) was creating problems for its semiconductor equipment company customers. Dampening the record results today was a sector-wide sell off of semiconductor capital equipment companies that was prompted by a number of downgrades from UBS Securities.
QUICK TAKES: AVON PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVP)") else Response.Write("(NYSE: AVP)") end if %> moved up $6 7/8 to $73 3/4 on announcing Q3 EPS of $0.52, in line with estimates, on a 6% rise in global revenues... Chile's Central Bank postponed a sale of shares it holds in BANCO SANTIAGO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SAN)") else Response.Write("(NYSE: SAN)") end if %>, which boosted that stock $2 5/16 to $23 7/8... CHINA EASTERN AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CEA)") else Response.Write("(NYSE: CEA)") end if %> gained back $1 5/8 to $21 3/8 after its descent yesterday as investors thought twice about its business prospects in Asia... LEARNING CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLC)") else Response.Write("(NYSE: TLC)") end if %> gained $1 7/8 to $19 1/8 on reporting that it entered into an agreement with ABC Inc. and Electronic Arts to acquire Creative Wonders LLC for about $40 million... Expanding markets for its products and the removal of litigation uncertainties helped boost shares of medical device maker SOFAMOR/DANEK GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SDG)") else Response.Write("(NYSE: SDG)") end if %> $5 7/16 to $69 1/8.
Casino and hotel operator MGM GRAND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGG)") else Response.Write("(NYSE: MGG)") end if %> gained $3 5/16 to $44 13/16 on speculation that HILTON HOTELS NYSE: HLT) was interested in acquiring it... Disposable diaper maker PARAGON TRADE BRANDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTB)") else Response.Write("(NYSE: PTB)") end if %> rose $1 3/16 to $19 5/16 after saying that it expects full-year 1997 earnings of $1.30 to $1.40 a share... Construction materials company CALMAT CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CZM)") else Response.Write("(NYSE: CZM)") end if %> rose $1 5/16 to $25 15/16 after reporting Q3 EPS of $0.39, beating estimates of $0.30... Shares of aircraft parts company KREISLER MANUFACTURING CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KRSL)") else Response.Write("(Nasdaq: KRSL)") end if %> soared $15 3/4 higher to $46 after announcing a 4-for-1 stock split... PREMENOS TECHNOLOGY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRMO)") else Response.Write("(Nasdaq: PRMO)") end if %> gained $2 3/4 to $14 3/8 after the electronic data interchange (EDI) software company agreed to merge with EDI and electronic commerce software and services company HARBINGER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HRBC)") else Response.Write("(Nasdaq: HRBC)") end if %>.
Uninterruptible power supply and software company AMERICAN POWER CONVERSION CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APCC)") else Response.Write("(Nasdaq: APCC)") end if %> added $2 3/8 to $29 5/8 on reporting a 27% increase in Q3 revenues and EPS of $0.38, plowing over the First Call mean estimate of $0.33... Raymond James started coverage of RESPONSE ONCOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROIX)") else Response.Write("(Nasdaq: ROIX)") end if %> with a "buy" rating, boosting shares of the cancer management company $1 3/4 to $11... Glucose monitoring system company TECHNICAL CHEMICALS & PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TCPI)") else Response.Write("(Nasdaq: TCPI)") end if %> rose $1 13/16 to $17 1/2 after a favorable write-up in Business Week magazine stating that it "could double in the next year"... Online bookseller AMAZON.COM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> slipped and then rallied $6 5/16 to $60 5/16 after reporting a Q3 loss of $0.36 per share after the bell yesterday. It was expected to lose $0.41 per share... Schroders raised its rating on shares of SPX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SPW)") else Response.Write("(NYSE: SPW)") end if %> climbed $4 to $63 3/4 after Schroders raised its rating on the vehicle servicing company to "outperform" from "perform in line."
High-power radio frequency amplifier manufacturer SPECTRIAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPCT)") else Response.Write("(Nasdaq: SPCT)") end if %> was clouted for $15 7/8 to $26 1/4 after reporting a 116% increase in Q2 revenues of $48.2 million and EPS of $0.59, beating estimates of $0.53. However, customer NORTHERN TELECOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NT)") else Response.Write("(NYSE: NT)") end if %> and its affiliates, which last year accounted for 75% of Spectrian revenues, are reducing forecasts for demand for the Spectrian's products for the coming year. For the second half of the year, Spectrian expects a 10% decline from first half revenues. The company also warned that NorTel's reduced orders will impact fiscal 1999 financial performance. Lehman Brothers, UBS, and Morgan Stanley have all cut earnings estimates for this year, next year, and for fiscal 1999.
APPLIED MAGNETICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: APM)") else Response.Write("(NYSE: APM)") end if %> dropped $1 5/16 to $26 3/16 after the maker of heads for computer disk drives reported Q4 EPS of $0.60, well below forecasts of $0.84. Gross margin for the quarter dropped to 26.7% from last quarter's 32.1% due to ramping up of advanced inductive head programs as well as the transition to magnetoresistive (MR) heads, which poses some uncertainty in the coming couple of quarters. Given that knowledge flows through the disk drive industry, the company will gain the benefit of experience from other companies' earlier efforts to move to MR technology. However, the transition uncertainty isn't reflected in its valuation versus competitor READ-RITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDRT)") else Response.Write("(Nasdaq: RDRT)") end if %>, as they're both trading at 6.0 to 6.4 times estimated 1998 EPS.
THE VANTIVE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VNTV)") else Response.Write("(Nasdaq: VNTV)") end if %> slid $3 1/2 to $27 1/8 after the enterprise management software company, which specializes in helpdesk and sales automation software, reported Q3 EPS before charges of $0.14, up 17% from last year, on an 80% rise in revenues. Some analysts might have been concerned by the amount of large deals that made up the quarter and that those deals were made toward the end of the quarter. So why did days sales outstanding, at 64 days, stay below the industry average with such a back-end loaded quarter? We don't have any idea whether Vantive did or would do this, but some companies elect to enter into non-recourse factoring of their receivables, which is like selling the receivable. That transaction increases cash, decreases accounts receivable (which decreases days sales outstanding), and shows up as a slight expense on the income statement.
QUICK CUTS: DSI TOYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DSIT)") else Response.Write("(Nasdaq: DSIT)") end if %> lost $3 3/8 to $4 1/2 after the maker of children's walkie talkies and other toys said it expects to record third quarter net sales of $30 million to $31 million, below what investors have been expecting... WFS FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WFSI)") else Response.Write("(Nasdaq: WFSI)") end if %> slid $3 9/16 to $14 1/8 after the auto lender reported Q3 EPS of $0.25, well below estimates of $0.44. Parent company WESTCORP INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WES)") else Response.Write("(NYSE: WES)") end if %>, which also reported lower-than-expected earnings today, fell $1 15/16 to $20 5/16... Telecom products distributor TESSCO TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TESS)") else Response.Write("(Nasdaq: TESS)") end if %> dropped $7 1/4 to $20 5/8 on reporting estimate-beating Q2 EPS of $0.19 on a 13% year-over-year decline in revenues... Fiberoptic lighting manufacturer FIBERSTARS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FBST)") else Response.Write("(Nasdaq: FBST)") end if %> dimmed $1 1/16 to $6 3/8 on reporting Q3 revenues of $4 million and EPS of $0.04, 50% below the one analyst's estimate offered by First Call... PLACER DOME <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PDG)") else Response.Write("(NYSE: PDG)") end if %> lost $2 to $16 13/16 and BARRICK GOLD CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABX)") else Response.Write("(NYSE: ABX)") end if %> fell $2 to $21 9/16 as spot prices and futures prices of gold plummeted... After rallying this morning, key Mexican stocks gave back ground today, with TELEFONOS DE MEXICO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TMX)") else Response.Write("(NYSE: TMX)") end if %> falling $2 5/8 to $46 9/16 and GRUPO TELEVISA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TV)") else Response.Write("(NYSE: TV)") end if %> losing $2 7/8 to $35 1/4.
FOOL ON THE HILL
An Investment Opinion by Randy Befumo
Semi Slump
Giving many investors horrid flashbacks to late 1995, shares of semiconductor and semiconductor capital equipment manufacturers plunged today. Renewed concerns about economic turmoil in Southeast Asia, falling dynamic random access memory (DRAM) prices, and sudden concerns about valuations in the industry have conspired against these volatile shares. The currency and pricing problems as well as a revision of previous capital expansion plans from industry leader INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> are making investors ask whether the Pollyanna scenario of abundant capital spending by these companies over the next few years is as certain as everyone had previously assumed.
Shares of MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %>, an excellent proxy for the DRAM spot market, fell $1 5/8 to $30 1/8 today as the closely watched spot prices for DRAM have continued to deteriorate. TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %>, another major manufacturer of DRAM, lost $9 to $111 7/8. Since mid-August, spot prices on 16-megabit chips have fallen from $5.70 to $5.80 all the way to $4.10. In the last month alone the drop has accelerated, with 16-megabit DRAM units down from $5.15 and slipping as much as 30 cents per day. Even pricing on cutting edge 64-megabit DRAM has dropped from $25 to $23, which has pushed memory makers further into the red.
With CMP Media's Semiconductor Business News reporting that the average cost to manufacture 16-megabit DRAM is $5.00 in Taiwan, Taiwanese memory makers are getting clobbered. Almost all Taiwanese DRAM manufacturers are currently losing money. TI-Acer, a joint venture between Texas Instruments and Acer, has had to revise 1997 profit forecasts downward three times this year. One of the largest semiconductor manufacturers in Taiwan, the company reported last Thursday that it would post a loss for the first half of the year. Even with this warning, investors were still shocked today when TI-Acer said that it lost $22.2 million in the first half and would post a loss for the full year. Back in January, TI-Acer stated it would make $23 million this year. This forecast was revised downward to only $4.2 million a few weeks ago, indicating that pricing conditions have seriously deteriorated over the last few week.
Profitability falling this fast normally indicates substantial overcapacity problems, which is a hindrance to capital equipment spending. If sudden price weakness for one of the semiconductor capital equipment industry's core customer constituencies was not bad enough, there is more. Currency crises in Malaysia and Thailand are raising questions about whether the non-memory semiconductor manufacturers can afford to build billion-dollar fabrication plants. If the currency problems turn into a sustained economic downturn in the region, end-user demand for chip-related products will suffer. Even once invulnerable INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> has been reigning in capital spending plans, stating today that it will push back the opening of a Texas flash-memory plant by a year to 2000.
All of these problems in the semiconductor arena bled into the semiconductor capital equipment manufacturers this morning when analysts started to connect the dots. The downgrades came from UBS Securities analyst Mark FitzGerald. FitzGerald reduced his ratings on shares of APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %>, LAM RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LRCX)") else Response.Write("(Nasdaq: LRCX)") end if %>, NOVELLUS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> and CFM TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CFMT)") else Response.Write("(Nasdaq: CFMT)") end if %> to "hold" from "buy," and reduced INTEGRATED PROCESS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPEC)") else Response.Write("(Nasdaq: IPEC)") end if %> to "buy" from "strong buy." "We believe fall out from the Asian currency crisis will lead to steep cuts in capital spending programs," FitzGerald wrote. Shares of these companies and other semiconductor equipment manufacturers like KLA-TENCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %>, PRI AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRIA)") else Response.Write("(Nasdaq: PRIA)") end if %>, and ASYST TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASYT)") else Response.Write("(Nasdaq: ASYT)") end if %> all flopped today as well.
Until recently, semiconductor capital equipment manufacturers have been among the darlings of the go-go momentum crowd, with many analysts stressing that valuations should be based on the "peak" earnings power possible in 1999 and beyond. Now those same analysts are publishing reports questioning whether the current valuations are actually sustainable, in spite of the fact that these valuations were already 30% to 40% below levels achieved two weeks ago when there was not a sell report in sight. On August 12, I wrote that it was "difficult to imagine that much of the good news has not already been discounted into [Applied Materials'] current price" given that Applied's sales were back to record levels and not much of a rebound from the 1996 slump seemed to remain. Although I certainly did not anticipate Southeast Asia imploding, the DRAM handwriting has been on the wall for months. (Reference the August 21 column on Micron Technology.) Although this kind of volatility is unfortunate for those who own the shares, as the stocks fall they actually become more attractive to investors.
PC DOCS GROUP INTL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DOCSF)") else Response.Write("(Nasdaq: DOCSF)") end if %>
(416) 695-5800 (code: 723627) -- replay
MICROWARE SYSTEMS CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWAR)") else Response.Write("(Nasdaq: MWAR)") end if %>
(800) 633-8284 (code: 3118988) -- replay through 10/24
TRIBUNE COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRB)") else Response.Write("(NYSE: TRB)") end if %>
(800) 633-8284 (code: 3218583) -- replay through 10/24
RTW INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RTWI)") else Response.Write("(Nasdaq: RTWI)") end if %>
(800) 475-6701 (code: 359246) -- replay through 10/24
ARBOR SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARSW)") else Response.Write("(Nasdaq: ARSW)") end if %>
(800) 633-8284 (code: 3217382) -- replay through 10/25
WILD OATS MARKETS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OATS)") else Response.Write("(Nasdaq: OATS)") end if %>
(800) 633-8284 (reservation # 3247180) -- replay through 10/27 @ 7:00 pm EST
RAPTOR SYSTEMS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAPT)") else Response.Write("(Nasdaq: RAPT)") end if %>
(402) 220-4216 -- replay through 10/27
FORTE SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRTE)") else Response.Write("(Nasdaq: FRTE)") end if %>
(402) 280-9000 -- replay through 10/27
SEAGRAM COMPANY and HSN, INC.
Regarding combination of television assets
(800) 558-5253 (password: 330 9589) -- replay through 10/28
(416) 626-4151 (password: 330 9589) -- replay for international callers
AVID TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVID)") else Response.Write("(Nasdaq: AVID)") end if %>
(402) 220-0105 -- replay through 10/29
GENZYME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %> and GENZYME TRANSGENICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GZTC)") else Response.Write("(Nasdaq: GZTC)") end if %>
(800) 633-8284 (code: 3265950) -- replay through 10/30
(303) 248-1201 (code: 3265950) -- replay number for international callers
10/27/97 (Monday)
FORCENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FEN)") else Response.Write("(NYSE: FEN)") end if %>
10:00 am EST
(800) 260-0702 -- live
(612) 332-0345 -- live for international callers
(800) 411-5828 (code: 362389) -- replay through 11/3
(612) 321-9419 (code: 362389) -- replay for international callers
10/27/97 (Monday)
BJ SERVICES CO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %>
3:00 pm EST
(913) 661-0896 -- live
(402) 220-9379 -- replay through 10/30
10/27/97 (Monday)
CYBERCASH INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %>
(888) 566-0175 -- replay through 10/29
THIS WEEK'S CONFERENCE CALL SYNOPSES
RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> Call
TIDEWATER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %> Call
IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> Call
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Randy Befumo (TMF Templr), Fool
One
Dale Wettlaufer (TMF Ralegh), Fool
Two
Alex Schay (TMF Nexus6), Fool
Three
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Brian Bauer (TMF Hoops), Fool Four
Editing