chart increase, AZ NASDAQ listed companies

An Analyst’s Look At How Arizona’s Nasdaq-Listed Companies Are Faring This Recession

Arizona has 52 Nasdaq-listed companies and the performance of those with the most capitalization during this economic downturn has been fairly good.

In early June, Stephen Taddie, managing member of Stellar Capital Management in Phoenix, reviewed the top 10 Arizona Nasdaq companies using Thomson Analytics as his data source. Those companies comprise nearly all the capitalization for Arizona Nasdaq-listed firms. They are Apollo Group, First Solar, Microchip Technology, PetSmart, ON Semiconductor, P.F. Chang’s, Amkor Technology, Mobile Mini, JDA Software and TASER International.

There was positive news concerning stock performance and internal company performance for the group as a whole.

Looking at stock performance for the three-month period from April 5 through June 5, Taddie found that “90 percent of the Arizona companies outperformed their peer group as a national comparison and all by a significant margin.”

Taddie next looked at stock prices for the year to date through May 31. While the Standard & Poor’s 500 stock index was approximately even for that period, seven of the top 10 Arizona companies outperformed the index by a fairly wide margin, Taddie says. Those that did not tracked the index closely, he adds. The seven companies were First Solar, Microchip Technology, PetSmart, ON Semiconductor, P.F. Chang’s, Amkor Technology and JDA Software.

“Apollo Group, the largest of the top 10 as measured by market capitalization, fared better than the rest through the first quarter of 2009, but was surpassed by the others as investor confidence rose significantly in April and May, encouraging investors to look past the current economic data and the financial statements of smaller, less capitalized companies to the earnings potential many of these companies will have in a more stable environment,” Taddie says.

Taddie also reviewed a compilation of analysts’ estimates for internal company performance for 2009. As a group — not as individual companies — analysts estimate revenue for the top 10 will be flat this year, up just .49 percent, but that it will grow 13.5 percent in 2010.

“Over the last six months, we saw many analysts lengthen the duration of the downturn but also decrease its severity,” Taddie says. “If we break it down quarter by quarter, the data reflect a fairly dismal first half of 2009, followed by a fairly decent last half of 2009.”

Estimates for next year’s revenue vary widely, Taddie says, because it is difficult to measure the impact of federal stimulus packages and significant cost-cutting measures in many industries.

“A significant capital-expenditure decline has frozen budgets,” says Taddie, who also is a member of the Western Blue Chip Forecast panel for the W.P. Carey School of Business at Arizona State University. “One firm’s cost reduction is another’s revenue shortfall and that has been trickling down the supply chain.”

Taddie says the data paint a picture in which Arizona firms, like many other companies across the country, are trying to preserve shareholder value by more closely aligning capital expenditures with expected revenue growth, or the lack thereof.

“Typically, the larger the company, the more apt they are to take a bet and invest into a downturn, so when the tide turns, they capture more market share,” Taddie says. “The smaller the company, the less apt they are to do that because they can’t take that risk.”

Managing expenses and growth in an environment where revenue expectations are “jumping all over the place” is a challenge, Taddie says.

“References to this period will show up in economics and business-management textbooks for quite some time,” he says. “The data is showing that the Arizona top 10 are faring at least as well as other companies and, when compared to stock-price performance so far this year, better.”