Last week’s nearly 7 percent decline in the Investco PHLX Semiconductor ETF (SOXQ) is a red flag. The
sector is typically a leading indicator. The technology sector’s health is worsening. PC sales are falling
and supply chains are still somewhat disrupted.
Last week, HP Inc. (HPE) posted non-GAAP earnings a share of $1.04. Revenue fell by 4.2% Y/Y to $14.66
billion. Personal systems net revenue fell by 3% Y/Y to $10.1 billion. As expected, printing net revenue
fell by 6% Y/Y to $4.6 billion.
Dell (DELL) posted similarly weak results. HP is particularly disappointing because it estimates Q4/22 EPS
of 44 cents to 54 cents. For the year, GAAP EPS will be in the range of $3.46 to $3.56. The value investor
would take advantage of HPQ stock hammering to $27.64 for a 4.95 times price-to-earnings ratio. In
addition, the stock pays a $1.00 per share dividend for a 3.62% yield.
Risks are high that PC makers and suppliers will underperform. AMD stock lost 12% last week despite
announcing Zen 4. The over 5 GHz PC power failed to impress investors. AMD CPU performance is
proportionate to the power draw.
Nvidia’s (NVDA) weak results did not help the sector. It lost 16% in the last week.
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