Bloomberg News

Improving Tech Outlook Spurs Rally for Tower: Israel Overnight

June 10, 2012

Israeli shares traded in New York posted their best weekly gain since April after valuations slumped from their 2012 peak and the outlook for technology companies improved.

The Bloomberg Israel-US Equity Index of the most traded Israeli companies in New York added 4.5 percent to 82.41 last week, the biggest advance since April 20. Check Point Software Technologies Ltd. (CHKP:US), the world’s second-largest maker of security networks, added 6.4 percent, snapping its longest weekly losing streak since 2007. Tower Semiconductor Ltd. (TSEM), a maker of customized chips, gained the most since the week to March 23. Tower declined 0.3 percent at the close in Tel Aviv today.

New York-traded Israeli companies are valued at 12.6 times estimated earnings, compared with a 2012 peak of 14.8 on April 19 and a multiple of 15.4 for the average company on the Nasdaq Composite Index. Texas Instruments Inc. (TXN:US), the largest maker of analog chips, will update its second-quarter forecast on June 11 and will probably maintain its midpoint revenue (TXN:US) target of $3.35 billion, according to reports from Stifel Nicolaus & Co. and Williams Financial Group Inc.

“The sell-off last month has made a lot of the stocks look very cheap and tech investors are looking and saying: These are really good levels to buy at,” Jay Srivatsa, equity research analyst at Chardan Capital Markets LLC, said by phone from New York June 8. “There is also expectation Texas Instruments will provide guidance that shows the technology business is still pretty strong. If it reports as expected, we should see a broad- based rally that boosts Israeli stocks.”

‘Very Compelling’

Israel’s TA-25 benchmark gauge gained 0.5 percent to 1,094.66, the highest close since May 16. The gauge has added 0.8 percent in this year, compared with an advance of 1.4 percent for the Israel-US Equity Index. (ISRA25BN)

Check Point, based in Tel Aviv, rose to $53.67 in New York, its first five-day gain in seven weeks. The company trades at a multiple of 16.8 times estimated earnings, compared with 18.2 on April 30, before the shares slumped (CHKP:US) 12 percent in May.

Shares of Tower advanced 9.8 percent to 82 cents in New York last week. The company trades at 2.3 times estimated earnings, compared with a multiple of 4.5 on May 1. Tower slid 21 percent last month (TSEM:US), the sharpest drop since August.

The company’s Tel Aviv stock fell to 3.171 shekels in Israel today, or the equivalent of 82 cents.

“There is a sense the stocks were way oversold and they now look very compelling,” Srivatsa said.

Bellwether

Texas Instruments forecast second-quarter revenue in the range of $3.22 billion to $3.48 billion, the Dallas-based company said in a statement on April 23. The mean estimate (TXN:US) of 34 economists surveyed by Bloomberg shows sales dropping to $3.37 billion from $3.46 billion a year ago.

Personal computer sales are forecast to decline 10 percent in North America and western Europe on weaker demand in the second quarter, according to International Data Corporation data.

Weaker sales are expected to erode second-quarter earnings for Dell Inc. (DELL:US), Acer Inc. (2353) and Hewlett-Packard Co. (HPQ:US), three customers (TXN:US) of Texas Instruments, according to data compiled by Bloomberg.

“There has been a lot of fear in recent weeks that a soft PC market could be an indication of a bad technology market,” Cody Acree, director of equity research for Williams Financial Group, said by phone from Dallas on June 8.

Texas Instruments is viewed as a bellwether for the technology industry, with customers ranging from telecommunication to consumer electronic firms, Acree said.

The company will probably maintain the midpoint of its guidance of $3.35 billion on June 11, Williams Financial and Stifel Nicolaus said in reports last week.

Removing Concern

“If the guidance doesn’t come in negative, it will remove some portion of concern,” Acree said. “I see that helping the tech stocks related to Israel.”

SodaStream International Ltd. (SODA:US), the Israeli maker of home soda machines, jumped 17 percent to $35.36 in New York, the biggest weekly advance since Jan. 6.

The company said June 4 that it would begin developing co- branded soda makers with Breville Group, an Australian designer of consumer appliances.

Allot Communications Co. (ALLT:US), an Israeli maker of networking equipment, added 6.4 percent to $26.33 in New York, its third consecutive weekly gain. The Tel Aviv shares advanced 2.5 percent today to 104 shekels, or $26.84, the highest on record.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies trading on the Nasdaq Stock Market, the most of any nation outside the U.S. after China. The country is also home to more startup companies per capital than the U.S.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • CHKP
    (Check Point Software Technologies Ltd)
    • $68.48 USD
    • 0.98
    • 1.43%
  • TXN
    (Texas Instruments Inc)
    • $46.82 USD
    • -1.04
    • -2.22%
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