Tech investors have shot first and asked questions later when it comes to companies issuing profit warnings. This morning Sandisk (SNDK) stated that Q1 sales would be lower than their guidance given on January 21st by about 9% and the stock is down 19% making new 52 week lows:
On the flip-side there are two tech stocks that have broken out today on better than expected results and slightly downgraded forward guidance.
First, Accenture (ACN), the tech consultant beat consensus and guided the current quarter and fiscal year down a tad as a result of negative currency impact. The stock is up 7% on the day making new all time highs:
And then there is open source software vendor Redhat (RHT) up 12% after reporting better than expected results in the quarter just ended, but also guided down the current quarter and fiscal year a tad also citing currency headwinds. RHT is making new 15 year highs:
So the take-away to me is kind of simple:
If you are in a massively commoditized business like flash memory and your margins are declining in an increasingly competitive end market, then your stock is likely to see lower lows in the near term. If you are showing better than expected bookings in value added tech consulting services and in the midst of one of the strongest secular trends in software/computing in years, and able to manage your currency exposure and continue to buy back your own stock then there is little to no overhead resistance for your shares.
All that said, I do think it is important to note that the weak results from component suppliers like INTC, QCOM, STX, TSM & SNDK are not likely to be a one off situation. And then add in results/guidance from storage vendors like EMC, NTAP and VMW, and hardware oems like IBM & HPQ, not to mention software behemoth MSFT’s recent guidance and I would suggest the PC and smartphone supply chain and OEMs seem to be in a world of hurt and could be suggesting a near term outlook that is less than rosy for the health of consumers and enterprise demand for technology products and services.