Did earnings boost Micron, Concentrix and TD Synnex shares?

Concentrix shares slid on Wednesday after the company reported earnings, but its purchase ofWebhelp could bolster future prospects. Earlier in the week, Micron’s earnings allayed the market’s worst fears, while TD Synnex delivered mixed results.

- Concentrix acquisition of Webhelp for $4.8bn could boost revenues.

- Micron says the memory chip market is on road to recovery.

- First Trust Technology AlphaDEX Fund is up 12% year-to-date.

In a busy week for tech, Micron Technology [MU], TD Synnex [SNX] and Concentrix [CNXC]posted earnings on Tuesday and Wednesday.

Micron announced revenues of $3.7bn for the second quarter (Q2) of 2023, a drop of 52.6% year-over-year. Earnings at a loss of $2.12 per diluted share were a steep 206% drop from EPS of $2.00 a year earlier.

Despite this decline, results were better than the market had feared, and the Micron share price closed up 7.2% the following day and up 27.1% year-to-date.

Meanwhile, TD Synnex posted lukewarm results for fiscal Q1. Revenues of $15.1bn slid 2% year-over-year, and non-GAAP diluted EPS of $2.93 fell 3% year-over-year. Shares closed up 1.3% the following day but remain down 1% year-to-date.

Concentrix Q1 2023 revenues came in at $1.64bn for the three months to the end of February, up 6.5% year-over-year and narrowly beating Refinitiv analyst expectations of $1.63bn. Diluted earnings of $2.56 per share were down 10.2% year-over-year, missing expectations of $2.60.

The same day, Concentrix announced it is to buy Paris-based consultancy Webhelp in a deal worth $4.8bn. The Concentrix share price slumped over 7% in extended trading on Wednesday but is down 8.4% year-to-date.

Earnings Review

Despite “challenging macroeconomic conditions”, Concentrix president and CEO Chris Caldwell said earnings achieved the top end of expectations, adding he expected “robust demand”.

While the company’s net Q1 income at $87.9m represented a fall of 20.3% year-over-year, forecast adjusted constant currency revenue growth of 3% to 5% would bring revenue to a range of $1.64 to $1.67bn—barely above the $1.64bn reported in the recent quarter.

The acquisition of Webhelp should significantly drive revenues, with Concentrix estimating it will bring in approximately 1,000 new clients and generate $9.8bn in revenues in the fiscal year 2023. Webhelp provides sales, marketing and payment services in Europe, Latin America and Africa.

Meanwhile, Micron reported operating cash flows of $343m for Q2 2023, a sharp fall from $3.6bn in the year-ago quarter.

In a prepared statement, Sanjay Mehrotra, president and CEO of Micron, said the results were driven by the semiconductor memory and storage industry “facing its worst downturn in the last 13 years, with an exceptionally weak pricing environment”.

Mehrotra said Micron was now taking “substantial” measures to address this, including reducing supply and job cuts.

The company forecast Q3 2023 revenues of $3.7bn, plus or minus $200m, down 57% from $8.6bn for the equivalent 2022 period.  

Despite arguably disappointing results, Mehrotra said: “Micron delivered fiscal Q2 revenue within our guidance range in a challenging market environment.”

Elsewhere, TD Synnex reported that “revenue growth in constant currency was driven primarily by [its] Advanced Solutions portfolio and high-growth technologies [and] partially offset by a fall in [its] Endpoint Solutions portfolio.”

It posted an operating income of $298m, jumping 34% year-over-year. For Q4 2023, it anticipates similar revenues of $14bn to $15bn.

After the results, Barclays reduced its price target on TD Synnex shares to $103 from $109.

AI and CX driving future tech results

The chip industry has had a tough time of late, including supply-chain issues and a lag in consumer demand for items like phones and computers in the face of soaring inflation.

Mehrotra said he expected “gradual improvements to the industry’s supply-demand balance”.

Artificial intelligence (AI) is likely to be a major driver in the tech theme for the foreseeable future. Mehrotra told analysts he was confident about Micron’s long-term prospects, predicting the memory chip sector would see its market expand to record levels by 2025.

He added: "When you look at the future, it equals AI. And AI equals memory, and Micron is well positioned with our technology and product road maps to address the growing opportunities there.”

Meanwhile, Concentrix’s new deal with Webhelp is designed to help it conquer the growing global customer experience market, which the two companies estimate to be worth more than $550bn.

Funds in focus: First Trust Technology AlphaDEX Fund

Investors seeking exposure to the shares of all three companies could look at the First Trust Technology AlphaDEX Fund [FXL], where Micron Technologies is the fifth-largest holding as of Wednesday, with a weighting of 1.90%. TD Synnex has a weighting of 1.18% in the fund, while Concentrix has a weighting of 1.10%. 

The fund is up 12% year-to-date and up 1.1% in the past month.

Concentrix is the fourth-largest holding in the Invesco S&P Spin-Off ETF [CSD] as of Wednesday, with a weighting of 4.22%. The fund is up 5.7% year-to-date but down 4.2% in the past month.

Micron is the second-largest holding in the First Trust Nasdaq Semiconductor ETF [FTXL] as of Wednesday, with an 8.21% weighting in the portfolio. The fund is up 19.8% year-to-date and up 4.8% in the past month.