Needham & Company Semiconductor Capital Equipment: Strong Start to 2012, but Possibility of 2H12 Slowdown

March 19, 2012 9:23 AM EDT
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Needham & Company Semiconductor Capital Equipment Update Vol. 26: Strong
Start to the Year, but Possibility of 2H12 Slowdown Remains

Analyst, Y. Edwin, Mok, said, "We Prefer These Names with Company-Specific Drivers: Lam Research (Nasdaq: LRCX), Brooks Automation (Nasdaq: BRKS), Nova Measuring Instruments (Nasdaq: NVMI) and FSI International (Nasdaq: FSII) In the near term, we expect semi equipment stocks to remain strong, driven by increased orders for leadingedge capacity expansion coming from multiple chipmakers. With Intel (Nasdaq: INTC) (Hold), TSMC (NYSE: TSM) (N/R) and Samsung LSI (N/R) driving growth in 1Q12 and incremental orders from United Microelectronics (NYSE: UMC), Hynix (both N/R) and GlobalFoundries in 2Q12, we anticipate overall order/revenue guidance for 2Q12 to grow another 5-10% sequentially. Based on this near-term strength, we see further upside to semicap stocks going into the 1Q12 earnings season. However, we believe a slower 2H12 remains possible, especially if the leading chipmakers “merely maintain” their CAPEX budgets. We believe stocks will likely be range-bound following the earnings season and at least until SEMICON in July. Therefore, we continue to recommend investors focus on stocks with company-specific drivers, rather than buying the semicap cycle. Among the names under our coverage, our favorites are Lam Research (LRCX, Buy), Brooks Automation (BRKS, Buy), Nova Measuring Instruments (NVMI, Strong Buy) and FSI International (FSII, Buy)."

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