UBS’s chip analyst Uche Orji this morning raised his rating on chip company stocks to “Positive” from Neutral, arguing that some key indicators for the group have almost hit a trough and may start to rebound. Stocks are cheaply valued and generally company balance sheets are in good shape, he writes.
Orji raised his rating on four stocks to Buy from Neutral: Texas Instruments (TXN), Linear Semiconductor (LLTC), Maxim Integrated Products (MXIM), and Analog Devices (ADI). He continues to rate as Buy the shares of Qualcomm (QCOM), Intel (INTC), Micron Technology (MU), Sandisk (SNDK), Samsung Electronics (SSNLF), Taiwan Semiconductor Manufacturing (TSM), Infineon Technologies (IFNNY), Korea’s Hynix Semiconductor (HXSCL), Atmel (ATML), Broadcom (BRCM), and Altera (ALTR).
His least favorite chip names remain Nvidia (NVDA), Intersil (ISIL), RF Micro Devices (RFMD), Diodes (DIOD), and Taiwan’s Nanya Technology (2408TW).
Orji goes through lagging and leading indicators that offer signs of hope:
Orders and rolling forecasts have by and large stopped to deteriorate [sic] recently, post a last leg down earlier in the quarter. We also think that PC DRAM prices have passed a trough for now. Hence, we believe investors will re-focus on lead indicators. We see the most relevant of them at trough levels (supply-led) or close to through levels (YoY semis revenues growth and utilisation rates by 1Q12). We expect semis stocks to start outperforming in anticipation of this.
In sum, writes Orji, inventory, utilization rates, and product cycles — the three factors that semi companies can control — are all in good shape. The fourth big factor, the general macroeconomic outlook, will, perhaps, take care of itself, he suggests, as “the rate of deterioration of macro lead indicators will slow down from here.”
No comments:
Post a Comment