Teradyne (NYSE: TER), a leading maker of semiconductor testing equipment, is less known than other semiconductor sector stocks such as Intel and Texas Instruments. But because every electronic component made needs to be tested, Teradyne plays a central role in the chip sector.  Moreover, because demand for its testing products rises and falls with the fortunes of the chip industry, Teradyne’s overall results and outlook offer excellent clues as to how well the whole sector is performing.  Fortunately the news is good of late.

In the company’s most recent post earnings report conference call, CEO Mark Jagiela, noted both excellent quarterly results and rising strength in orders for “mobile, microcontroller, image sensor and analog tests,” suggesting that there is broad demand in the sector. 

The stock is steadily gaining ground based on its own results but also on the general positive vibe of the whole chip sector.  For example, in Q4, Teradyne exceeded revenues by $32.52 million and beat earnings expectations by ten cents per share. This is the fifth quarter in a row of beating expectations. Adding an even more bullish tone, the company raised its dividend by 7 cents and updated its guidance for its upcoming quarter based on record orders in Q4. The balance sheet is full of cash ($1.6 billion) and long term debt is very manageable at $460 million. The company has an additional $768 million in cash offshore which it expects to repatriate when tax policy is more favorable.  Teradyne is also looking toward the future and is cautiously expanding into robotics via acquisitions.

Buy Teradyne up to $30. I have a position in TER. Sell Stop $24.

AMAG hits stop as analysts flee

AMAG Pharmaceuticals (NSDQ: AMAG), a biotech company focusing on maternal medicine, fell below our sell stop of $22 this past week.  I was perplexed and disappointed, given that the company’s shares pierced our sell limit after releasing a positive result on a Phase III clinical trial and announcing that it would be filing a New Drug Application with the FDA.  The new product is a self injector for its market leading Makena drug, which prevents premature births.  

So why did we see the drop in the stock’s price? The simple truth is that too many analysts have turned sour on AMAG and given the company’s love for debt-based acquisitions, it doesn’t look as if the stock can prosper without Wall Street analysts supporting it, regardless of its potential. 

Sell AMAG Pharmaceuticals.

Synergy’s growing pains

Synergy Pharmaceuticals (NSDQ: SGYP), a biotech company specializing in products focused on gastrointestinal diseases, has the potential to be a big winner if it can get past some growing pains. The FDA approval of its constipation drug, Trulance, had given the stock a lift of late. Yet the last two trading days of the past week were a bit rocky. This type of action is certainly worth noting, but is not necessarily a negative.

As I noted in my initial recommendation, this tiny company only had $100 million plus on its balance sheet. Given its $90 million in debt, it’s clear that it could handle a catastrophic event and survive. But instead of a catastrophe, Synergy now has a potential blockbuster on its hands with Trulance. This new product will require capital for a big production and marketing push, so management exercised a previously shelved stock offering, which diluted the price of the stock and led to the price volatility as the market adjusted.  As with all small stocks, volatility is part of the package with Synergy.  I still like it, and recommend buying it especially on dips that stay above the $5 sell stop.

Buy Synergy Pharmaceuticals up to $7. Sell stop at $5.  I have a position in Synergy Pharmaceuticals.

– Joe Duarte

Silicon Laboratories Beats Earnings

Silicon Laboratories (NSDQ: SLAB) is trading near all-time highs after beating its quarterly earnings estimate yet again. Revenue posted a 14.1% year-over-year gain in the fourth quarter, hitting $182.6 million, while earnings per share rose 261.5% to $0.47, beating both top and bottom line guidance. The Internet of Things segment was the biggest contributor as revenue rose 5% compared to the third quarter to $85 million, while Infrastructure revenue was down slightly and Broadcast revenue was flat.

Management predicted first quarter revenue would come in between $174 million and $179 million, growth of better than 8%, while EPS should fall between $0.57 and $0.63. Analysts think both sales and earnings will come in near the bottom of that range, but that’s still respectable growth for what historically is the weakest quarter for the company. With the recent acquisition of Zentri, which makes low-power WiFi technologies, and the launch of the industry’s smallest Bluetooth chip, I wouldn’t be surprised if it turns in another beat though.

Silicon Laboratories is now a buy up to $77.

– Benjamin Shepherd