IBM and Intel painted differing earnings pictures last night, but traders are painting them with the same rosy brush this morning.
IBM beat drastically lowered estimates by a penny and came in light on revenues, but traders bid the stock higher after Big Blue reaffirmed estimates for the fourth quarter.
Intel met estimates, but warned for the fourth quarter – usually the company’s strongest, and the one that was supposed to mark a turnaround. After some initial hesitation, traders bid Intel higher too.
EMC is trading lower after the company missed estimates by a mile with a 12-cent loss and didn’t provide much in the way of guidance.
The problem with the big-cap techs remains the same: valuation, valuation, valuation.
Before today’s report, Intel traded at 5.7 times sales and 4.5 times book value, and would look expensive at this level if revenues double next year. Nonetheless, the stock’s chart looks like Intel could hit 29-30 before it runs into real resistance. It also formed a nice base before rallying, something very few stocks have done lately (see chart below).
IBM is the only reasonably valued one of the three, at 2 two times sales – but almost 8 times book. The stock looks like it could reach 112 if it can hold its 200 day moving average at 105.09.
EMC trades at about 3 times sales and 3 times book – yet the stock looks like it could potentially go to 16-16.50 if it can break out of the bullish ascending triangle it has been forming (see chart below). Critical support is at about 11.50; below that, the pattern would fail.
That said, despite the massive ramp up in the futures overnight, this market sure looks tired this morning. The third gap in a move is usually a hint of exhaustion, and this morning was the Nasdaq’s third.