Microchip technology pre-annouced a miss on revenues and guided lower last night. Read the words of the CEO himself:
“We were disappointed with the level of business activity in the September quarter. The September quarter is usually a back-end weighted quarter because of a traditional weak August due to holidays in various parts of the world. The month of September is usually a strong month for our revenue after the summer holiday period. This time, the September sales did not materialize to our expectations. The revenue miss was led by China where the September quarter is traditionally the strongest. This time, sales in China, excluding ISSC, are expected to be down sequentially,” said Steve Sanghi, Microchip’s President and CEO.
Mr. Sanghi added, “Microchip often sees the turn of the industry ahead of others in the semiconductor industry. First, in contrast to many others in the industry, we report sales from distribution on a sell-through basis worldwide. We built a significant amount of inventory in the distribution channel in the September quarter. If, like many others in the industry, we recognized sales on a sell-in basis to our distributors, our sales would have been significantly higher for the September quarter. Second, Microchip does business with over 80,000 customers worldwide, most of whom are small and nimble and are able to adjust their demand in real time. We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future.”
“While we are reducing our production levels in our wafer fabs and assembly and test facilities, we are continuing to ramp production on our new technologies where we have been capacity constrained. We believe that we will be able to catch up on the capacity constraints during the December quarter and lead times should return to normal. The December quarter is seasonally our weakest quarter of the year. During typical industry corrections, we have returned to sequential revenue growth after two quarters and we currently expect the same this time,” added Mr. Sanghi.
As a growth manager and a technology analyst MCHP was always one of the companies I paid attention to in order to figure out the health of the semi industry and the global economy. Their products are literally in everything from autos to industrial parts and as you read above they have 80,000 customers. So I would say they are a good read on the sector and global economy given their breadth of customers and sell through model. The charts of semi conductor companys have rolled after a multi-year run and what I would call a blow off top. You have ugly charts now confirmed by bad fundamentals. These stocks are now shorts into strength.
Semi cycles also tend to correlate to the beginning and the end of economic swings. In 2008 semis bottomed in November well before the 2009 low and demonstrated relative strength. Now the stocks have rolled hard and company fundamentals are sloping down. Clearly there is something ominous going on in the global economy. Oil and commodities are collapsing and now semis are missing numbers. All major global indices are rolling simultaneously and now we have proof that global demand is falling off rather quickly. Many people keep talking about how good the economy is doing. Microchip Technology would suggest otherwise: they are the tip of the spear. The bullish arguments for stocks are slowly losing their luster.
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Very interesting Bluestar, thanks for posting.
Jworthy,
I was not expecting that bad fundamentals would show up this quickly. Usually stocks lead bad news. The speed of this slowdown is frightening and augurs poorly for this market.
PANIC
BlueStar, excellent post, as always !
Good luck to all.
Blue, We are resting at that SPX 1918ish level, but really thought we would have hit that Oct 2. But China is back from their holiday and they ain’t restocking, so imho that aud/usd has to come down a lot more. Without Central Bank Action it is going to pull everything down fast and hard, next stop SPX 1755. HI FLY!
blue …due you cover now and short later again..what option period do you use.
Bill,
I have not covered put. I am playing with the houses money. If we crash I can double my capital. I did shuffle the deck. Covered AMZN stcok and went short FB stock. the last to stand will fall the hardest. But you must be quick and have tight stops
This was a good day, that is all.
My 1908 target hit just peachy…
Thanks Blue…
Mr. P, Good day for the Nymph too..but will be happier once we are back under 1755 SPX. Blue, Are you Bottoms Up Micro? Or do you combine? If you T/A, what is your primary besides Cycle theory and EW?
Good post. People are in disbelief. During times like these, I stay in cash and drink Hendricks. Good day.
Blue,
So you know Shemitah?
In the past few years less than handful of people have impressed me… and you just did.
Hat tip, only few know and understand.
I thought there was something different about you.
Mr.P
Trading Nymph,
I do micro in between turns. At tops and bottoms correlations rise so short beta at a top and long beta at a bottom. Stock pick in between.
bushwaker2,
I learned the hard way that stocks figure out bad fundamentals before I do.
Mr. P.
There are many things at play here. Few would understand. peace.
Mr. P…Are you talking about the Shemitah cycle begins Sept. 25, 2014 – ending Sept. 13, 2015?
TN,
yes .. every seven years…
You can find more on the web about it… sort of Global Reset thing starts at Jewish New Year and lasts for a year.
Mr.P
S&P’s close right on their 200, ES dives after close, & everyone on my stream is worried or bearish (finally!) . Sounds like a reasonable spot for a decent countertrend rally to me.
Sonny,
I would think so as well. However, the structure of this decline suggests the Dow will take out its august lows. Look at the transports. Sliced through August lows.
Blue..Thanks, Stockpicking is so much fun, I miss it. Mr. P, it really does make sense, the dustbowl was created with the overfarming of the lands. And we made such a bubble with the over mining/drilling of the land since 2009.You know 1929 had a commodities bubble too. We do need to give it a year off to rest. Thank You for teaching me something new (again). Been reading about it for about an hour, interesting! Plays into many Cycle theories perfect too.
Hi BlueStar,
I know that you are no longer in the PM business, but I was wondering if you could provide insight to me in how you would run your Roth IRA?
I’m under 30, and have been investing and trading for almost ten years. I have a brokerage account, where most of my activity is short term in nature. However, in my Roth, I am on the fence of whether to hold 6-7 large cap growth stocks, or just stick to more of a GARP strategy?
Any insight by you, or anyone else on this website, is much appreciated. I value all sensical advice. Take care, and thanks ahead of time.
Bluestar, despite my last comment about getting too cute, I covered all shorts in the premarket at an effective Dow 16,427. Anything 16,300-400 likely to be defended as the lows of the year and a reasonable spot to take a countertrend trade. The Russell is the only index making LH’s/LL’s, and I expect that longs would like to keep it that way. I’d like to see that swing low tested in cash hours today, whereupon I may attempt some knife catching.
Nice work, BlueStar. It’s not surprising that statement from MicroChip spooked big money. It sounds like he’s worried about the state of his business.
Nice job Blue. I’m looking at stocks like YELP at 16x price/sales as great short opportunities, especially if I can get a little bounce to sell into.
boyaj,
Tough call. I would rather not make long term calls like that right now. The lower we go the better those investments would look if you started them with new cash.
Bunk,
I am still holding. I am actually speechless at the action unfolding.
trader x,
thanks. be careful going short here but bounces are shortable events.
Quality,
Wait for a bounce. Prime short squeeze candidate. However, I think long term this stock is down 60-70% when it is all said and done.
Blue,
just a little more and you can remove the Blue part for your name 🙂 lol
Mr.P
Mr. P
What say you as to the next move? I think the top is in now it is tactics.
I would love 1818 on SPX may be just wishful thinking 🙂
Some names look sooo good now though… hard to resist