Tuesday, 7 November 2017

Intel Collaborates With AMD In An Effort To Find Middle Ground

Intel is using AMD's graphics silicon in its multi-chip module for portable PC space, targeting enthusiasts. It's good news for AMD amid exposure to the high-end market through this collaboration. Intel’s sourcing of custom-graphics chip from AMD might be a signal for price and market collaboration later.
This seems to be the beginning of a collaboration, rather than confrontation, between the only two consumer-computing players. The collaborative approach, and price signaling – in case it works, will help Intel sustain margins while boosting AMD’s market share in the mainstream PCs and high-end portable graphics space.

Friday, 3 November 2017

As An AMD Bull, 2 Things We Don't Like From The Q3 Filing

Unit sales didn’t grow much, indicating sluggish market share growth. Low visibility around EYPC sales indicates full-fledged server deployment needs time. Nonetheless, bull thesis remains intact as AMD is maintaining node parity.

Although sluggish unit sales growth and lack of visibility around EPYC sales are challenging, these headwinds are short term. Market share will gradually shift toward AMD as the company continues to offer comparable products. Ryzen’s full potential is yet to be seen as mobile processors just came out this month. Slow uptake in enterprise is natural, and share will improve substantially going forward.

AMD has successfully closed the technology gap. It’s only a matter of time before the company gains decent market share. Having two players in the market is better for both consumer oriented suppliers and data center service providers. It all comes down to the fact that AMD’s market cap is just around 4% of Intel’s market cap. Even a small dent in Intel’s market share will boost AMD’s market capitalization. Now, think about AMD taking more than 20% of Intel’s market share and you will know that it’s still a bargain.

Monday, 30 October 2017

Macom Technology: Is the Growth Story Intact?

MACOM Technology (NASDAQ:MTSI) has been on a decline, shedding 38% of its market share since July. Stifel’s downgrade further shattered investors’ confidence as the firm cited weakness in China as worrisome for MACOM.
Negative sentiment is fueled by the slowdown in growth, acquisition costs and integration challenges related to newly acquired businesses like AppliedMicro.

Nonetheless, long-term prospects remain positive. The industry is set to grow, thanks to the exponential growth of cloud data centers and upcoming switch to 5G in the telecom industry. Recent weakness in growth and margin is a short-term headwind. MACOM continues to post double-digit revenue growth. Negative sentiment is overstated.

The market is reacting to short-term integration headwinds and a slowdown in growth. It's ignoring the fact that acquisition-related costs are a short-term headwind; integration benefits will follow. Further, industry analysts have a consensus on growth. Only some predict the slowdown to persist, but that’s also for a year. Over the long run, the stock is poised to benefit from industry growth. MACOM seems to offer some value in a stock market that’s flooded with overpriced momentum stocks.


Saturday, 28 October 2017

Netflix: Wall Street is Missing the Bigger Picture

Netflix Inc. (NASDAQ:NFLX) reported its third-quarter earnings recently, beating subscriber growth expectations. The company added 5.3 million subscribers during the quarter compared to the consensus of 4.5 million. While Wall Street is fixated on the subscriber growth, the latest earnings report sheds light on several concerns.

First, Netflix is evolving into a content company. This puts pressure on the financing needs as well as margins. Second, entering digital distribution is not very difficult, which is paving the way for new streaming players. This will result in content being offered though several platforms, pressurizing Netflix's distribution moat.

Netflix is an impressive entertainment company that benefited from its distribution model. As other companies see digital as the new distribution norm, they will focus on creating in-house streaming services. Creating an online distribution platform is no longer a barrier to entry given improvements in technology. 

Therefore, Netflix cannot rely on its distribution network alone. The company is focusing more on content as it can lose its distribution domination. High content costs will put pressure on Netflix’s financing needs as well as on its margins. 

Since the valuation is already high, the bottom line is Netflix should be viewed as a content creator with independent distribution, rather than a streaming player with a distribution moat. Investors should embrace the changing dynamic and stay on the sidelines for now.

China’s Petrol-Free Incentive: Implications for Tesla Motors and the Industry

China is looking to ban internal combustion engine (ICE) cars, according to a Chinese Government official. Xinhua, the official press agency of China, reported last month that the Chinese government has begun to look into a ban on said vehicles without disclosing any timeline. However, Xin Guobin, vice minister of industry and information technology, said the policy will be implemented in the near future.

Despite some environmental concerns regarding battery production, EVs are gaining wide acceptance around the globe. China, the largest car manufacturer, is at the forefront of promoting EVs. A ban of ICE vehicles will benefit EV manufacturers, especially local players.

International players like Tesla, however, are not expected to benefit from the policy. Moreover, competition will be intensified in light of government support.

In short, EVs are here to stay. The same cannot be said about any specific EV manufacturer, but local players should flourish as governments support alternative fuel vehicles.

Saturday, 9 September 2017

ECB Meeting: Here's What You Need to Know

In a recent monetary policy meeting held in Frankfurt, the European Central Bank (ECB) kept interest rates unchanged while keeping the bond buying at a run rate of 60 billion euros ($72.2 billion) per month. Subdued inflation and an uncertain exchange rate are the primary reasons for the continued expansionary stance of the ECB.
Interest rates are expected to remain at the current level for an extended period of time. Regarding quantitative easing, bond buying will continue at the pace of 60 billion euros until the end of 2017, or beyond if necessary. 
The medium-term outlook for inflation and growth remains unchanged for the eurozone. Despite strong economic growth, inflation lagged behind the target rate. 

GDP growth is improving
Economic growth in the eurozone looks stable with GDP expected to grow 2.2% and 1.8% in 2017 and 2018. Compared to the June 2017 projection, GDP growth has been revised upward by the ECB in the current outlook.

Economic growth is being supported by the expansionary monetary policy, according to the ECB. Quantitative easing is resulting in favorable financing conditions along with facilitating deleveraging, which in turn is resulting in corporate profitability, employment gains and demand growth.

Inflation stays under pressure
The ECB expects headline inflation to decline during the last part of the year. Improvement is yet to be seen in measures of underlying inflation. Annual HICP inflation is expected to be around 1.5% and 1.2% for 2017 and 2018, according to ECB Staff projections. 

Friday, 8 September 2017

Micron Maintains the Super Cycle

Micron Technology (MU) recently presented at the Citi 2017 Global Technology Conferencedebunking the ideas and arguments of a slump or a downward cycle in the business.
Ernie Maddock, senior vice president and chief financial officer (CFO), believes the demand for both DRAM and NAND will stay strong during fiscal 2018. He cited the need for data storage and data processing as the key drivers of growth.

The management expects the DRAM and NAND bit growth to be around 20% and 40% for fiscal 2018; demand growth will be in line with the bit growth, according to Maddock. 

This eradicates fears relating to worsening demand and increasing supply in the industry. Micron is set to grow in the year ahead amid decent demand growth along with stable supply growth. 

Is demand under pressure?
The short answer is no. Collection and use of data, its rate of expansion, along with applications in the automotive industry are driving the demand for DRAM and NAND, Maddock said. He explained that collecting data requires processing while saving data requires memory, which speaks heavily to the demand side of DRAM and NAND.

What about supply?
The investor community is concerned about excess supply in the industry going forward. China is the most cited reason for the expected future bit growth. Further, supply growth of ~40% in NAND also adds to oversupply concerns. According to the Micron’s management, supply is expected to remain in line with the demand; it won’t surpass demand.

Thursday, 31 August 2017

You Can Benefit From Lam Research’s Memory Exposure

Lam Research (NASDAQ:LRCX) witnessed a fantastic year as evident from its full-year results. Gartner’s recent cut in its capital spending forecast for semiconductor equipment manufacturers clouds Lam Research's future prospects. The company appears resilient as it’s backed by the memory industry, not to mention its exposure to Asia Pacific.

Lam Research had an impressive year, resulting in revenue and EPS beat. The company posted revenue of $8.01 billion, up 36.1% on a year-over-year basis. Fourth-quarter revenue came around $2.34 billion compared to the consensus of $2.31 billion. Full-year GAAP EPS was $9.24, translating into a notable 77% year-over-year increase. 

Most of the revenue comes from memory as the company caters to the manufacturing needs of Micron Technology (MU) and SK Hynix Inc. Increasing foundry revenue can be attributed to Lam Research’s exposure to Samsung (SSNLF) and Taiwan Semiconductor Manufacturing Co. (TSM). Shrinking process node technologies continue to benefit Lam Research.

Samsung, TSMC, SK Hynix and Micron are among the top companies in terms of capital expenditure in the semiconductor industry. With a 31% increase, the DRAM/SRAM segment is expected to display the largest percentage increase in capital expenditures of the major products types listed this year, cited IC Insights in its May Update to the 2017 McClean Report. 

Lam Research is poised to benefit as four of the top five capital expenditure intensive companies belong to Lam’s client list. Lam Research’s exposure to the memory market also bodes well for the company. The company generates more than 60% of its revenue from the memory market.

Overall, slowdown in growth isn’t expected to hit Lam Research much because of its heavy presence in the memory market and Asia Pacific. Note that Asia Pacific is set to remain the highest-growing market in WFE going forward.

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Wednesday, 30 August 2017

Growth and Value Combined in 1 Stock

It’s usually difficult to find a stock at a bargain price when growth is involved but not always. ON Semiconductor (ON), a manufacturer of semiconductor components for power management and imaging, surprisingly offers growth and value.

The company posted explosive revenue growth during the first half of the year, yet it’s priced at 10 times forward earnings, and the growth is not expected to vanish during the next few years. Double-digit top-line growth is in the cards. Regarding the bottom line, analysts expect earnings to grow 27% during the next five years. 

Regarding further growth, it might not be as explosive, but the company is going to witness healthy growth. The global automotive semiconductor market is set to grow at CAGR of 6.4% from 2017 to 2022, according to Lucintel. The automotive application of the imaging sensor market is expected to grow at a CAGR of 15.91% from 2015 to 2020. Advanced driving assistance systems and security awareness are driving the growth of the imaging sensors market. Regarding power management, TechNavio predicts the market will grow 7% p.a. until 2020.

Overall, ON Semiconductor is set to benefit from the growth of power management and image sensors. End markets like automotive will fuel this growth. Low double-digit growth is in the cards for the company amid its strong presence in the imaging semiconductor market. Further, integration synergies of the Fairchild acquisition are kicking in as operating expenses grew at a slower rate than revenue growth. 

Tuesday, 29 August 2017

AMD Baidu Collaboration - Nvidia has a New Competitor in HPC

Advanced Micro Devices (AMD) is joining forces with Baidu (BIDU) to work on GPU computing in data centers. They are teaming up to enhance optimization for applications that use Radeon Instinct accelerators. Advanced Micro Devices is eyeing the high-growing neural network and machine learning market with its current Radeon Instinct efforts.

The company is targeting the machine learning and neural networks market with its new GPU architecture, Vega. It's finally targeting the right market. The company's new architecture supports FP16 and INT8 modes, which are highly beneficial for machine learning performance. 

The most significant take away from the recent announcement is the software optimization efforts. One of the widely cited cons for Advanced Micro Devices' data center offerings is the lack of optimization and software support.

Sunday, 27 August 2017

Being Second Best Isn't Bad for AMD

"Being second best” isn’t the problem for Advanced Micro Devices (AMD). The company’s success is driven from closing the gap between CPU technologies - it isn't based on beating Intel's technology. To that end, the company deployed 14nm process in order to close the technology gap.
In the past, AMD’s technology problem stemmed from being on a lagging process node. That problem is now solved amid GlobalFoundries’ push into advanced processing technologies powered by the likes of Samsung (SSNLF) and IBM Corp. (IBM).
There is no point to inking pages in discussing the performance of Ryzen, Epyc and Threadripper. There is a lot of material around the web covering the performance aspect. The point is that AMD successfully closed the performance gap between its technology and the technology of Intel. This will lead to market share gains going forward.
AMD has closed the technology gap, thanks to 14nm process technology and Jim Keller's designing capabilities. Lagging technology doesn’t affect the bull thesis at all, as the thesis was based on narrowing the technology gap. If AMD were to beat Intel, it should be in Intel’s place in terms of market cap. Anyhow, “second best” is a moot point as far as the investment thesis is concerned.
Regarding multi-threading, AMD is a serious threat to Intel in the datacenter market. China’s market is already showing signs of AMD's product adoption. Ryzen is completely different compared to Bulldozer. Bulldozer’s failure won’t be reflected in Ryzen. Thanks to crypto currencies, AMD’s GPU side has the time to make amends. The balance sheet is indicative of healthy business coming the company’s way.

Thursday, 17 August 2017

Recent FinTech Partnerships Bode Well for GH Capital

GH Capital Inc. (OTCBB: GHHC)
Technology; FinTech; Buy - Risky

VMoney exposes the company to online money transfer market. Allied Wallet partnership will increase the company’s visibility in Germany and Austria. Downside is already priced in as evident from current stock price.

FinTech is an evolving space with new and innovative methods of financial services endlessly coming to the market. Growth of online businesses is fueling the need for additional and efficient financial transaction solutions. Consumers are always looking for convenience when it comes to shopping and related payments. This changing dynamic is what’s driving FinTech’s innovation and growth.

Sunday, 18 June 2017

Synaptics: Buy the Dip

Synaptics Inc (NASDAQ: SYNA)
Technology; Human Interface Solutions; 30%-50% Upside

IoT exposure, strong margin and cheap valuation put the company in value territory.

Synaptics Inc. (SYNA) lost more than 20% of its market cap in the last five days after acquiring Conexant Systems and Marvell Technology Group (MRVL) for a cumulative cash compensation of $395 million along with share-based compensation. You can see the detailed update here.

Synaptics also narrowed its midpoint revenue guidance for the fourth quarter of 2017. Cash spending, dilution and guidance revision were all too much for the market, and the reaction was ugly for Synaptics’ shareholders. The selling was not completely rational as the market just focused on the bad side and ignored the good one.

Tuesday, 6 June 2017

You Can Benefit from GH Capital’s Online Payments Growth

GH Capital Inc. (OTCBB: GHHC)
Technology; FinTech; Buy - Risky

Growth in online retail is reshaping industries, especially FinTech. Retailers are always looking for new, secure and cost effective payment systems. Adoption of internet retail has benefited many online payment service infrastructure providers including PayPal (PYPL), Mastercard Inc (MA) and Visa Inc (V). The growth story in the industry is so attractive that all star growers of the last decade are trying to get in to the payment game. Apple (AAPL) Pay, Google (GOOGL) Wallet and Amazon (AMZN) Pay are all evidence of potential lucrative growth in the payment market.

However, online payments are shifting towards more secure and hassle free payment methods like Online Banking Electronic Payment, or OBeP. GH Capital Inc. (GHHC) is exposed to the growth of online banking electronic payment industry through its subsidiary ClickDirectPay. The company is focusing on the European payment market, which has witnessed the highest adoption of OBeP services. Further, the company is positioned uniquely amid its creative pricing structure. The growth of OBeP industry along with merchants’ willingness to switch for costs advantage makes GH Capital Inc a good buy candidate in the OTC space. Details follow.

Friday, 24 March 2017

Add a Little Online Payment Exposure to Your Portfolio

GH Capital Inc. (OTCBB: GHHC)
Technology; FinTech; Buy - Risky

Online banking electronic payments are set to grow. Exposure can be achieved through GH Capital Inc. Online payments are set to evolve over time. OBeP is expected to witness double digit growth. Europe is the current playground for OBeP companies. Investing is problematic given Sofort and iDEAL are currently private. However, exposure can be achieved in OTC market through GH Capital Inc, which has one of the key advantages, cost.