Israeli equities traded in New York are headed for the biggest monthly gain since March as the earnings outlook improves for companies from EZchip Semiconductor Ltd. (EZCH) to Check Point Software Technologies Ltd. (CHKP)
The Bloomberg Israel-US Equity Index (ISRA25BN) of the most traded Israeli companies in New York has advanced 3.4 percent in July to 84.83, the most since March. Check Point, the world’s second- largest security networks maker, jumped 14 percent from a July 10 low as it reported adjusted earnings per share that beat analyst estimates. Bearish bets on EZchip, the technology company that supplies network processors to Cisco Systems Inc., have dropped from a 16-month high reached on July 9.
Israeli technology shares are gaining as investors speculate companies will maintain their sales forecasts, according to Stifel Nicolaus & Co. The Bloomberg-Israel gauge has outperformed the Nasdaq Computer Index (IXK) in July, which rose 0.6 percent. Intel Corp. (INTC), the world’s largest semiconductor maker, forecast revenue will rise 3 to 5 percent this year, allaying concern of growth remaining unchanged in the computer market.
“Investors, especially technology investors, see out a year from now, and they see the cycle tick upward,” Kevin Cassidy, an analyst at Stifel Nicolaus, said by phone from Washington on July 27. “The numbers aren’t as bad as people thought they would be.”
Israel’s TA-25 Index (TA-25) jumped 1.6 percent at 9:53 a.m. in Tel Aviv, taking this month’s advance to 2.6 percent. The benchmark gauge has climbed 2.3 percent this year, underperforming the Standard & Poor’s 500 Index, which has jumped 10 percent, and the Nasdaq Composite Index which has increased by 14 percent.
The U.S., the world’s largest economy, grew at a slower pace in the second quarter, pointing to a more sluggish recovery. Gross domestic product, the value of all goods and services produced, rose at a 1.5 percent annual rate after a revised 2 percent gain in the prior quarter, Commerce Department data showed on July 27 in Washington.
European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann on Aug. 2, according to two central bank officials, as he builds consensus for new monetary easing measures to contain the surging borrowing costs for some of Europe’s biggest economies.
The ratio of outstanding puts to sell the stock of EZchip versus calls to buy the shares dropped to 0.21 in New York, from 0.32 on July 9, which was the most since March 2011. The shares of the Yokneam, Israel-based company, which had slumped to $32.26 on July 13, have recovered 16 percent to $37.46 in New York. Its Tel Aviv shares have also climbed from a five-month low of 128.5 shekels on July 15, or the equivalent of $31.76, to 150.7 shekels, or $37.26, today.
“Stocks that have bounced back, in many ways got to oversold territory,” Jay Srivatsa, managing director of equity research at Chardan Capital Markets LLC, said in an e-mail. They may “drop back down if second-quarter results and third-quarter guidance are not in line with estimates.”
EZchip reports earnings results for the previous quarter on Aug. 8. The company will report sales of $15.5 million, according to the mean estimate of eight analysts.
Check Point shares closed at the highest level since June 20 as the company’s stock recovered from a 19-month low reached on July 10. The Tel Aviv-based company reported adjusted earnings of 77 cents per share, which was more than the 76 cent mean estimate of 27 analysts.
Even as the company relies on 39 percent of its revenue from Europe, it “benefits from its strength at the high end of the market,” according to a July 19 report from Zacks Investment Research.
Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.
Mellanox Technologies Ltd. (MLNX), which has tripled its market value this year, has risen 47 percent this month, after providing a sales forecast of as much as $155 million in the third quarter, 50 percent more than analyst estimates.
The Yokneam Elit-based company, with about 950 employees and a market value of $4.1 billion, accounts for 6.3 percent of Israel’s benchmark TA-25 Index, the fifth-largest member by weight. The Tel Aviv shares surged 7.5 percent to 425.3, or the equivalent of $105.14, today.
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