Needham & Company on Semiconductor Stocks: Turning More Defensive on Decelerating Growth Trends; Downgrading AMAT, UCTT & NVMI
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Rating Summary:
32 Buy, 10 Hold, 1 Sell
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Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
Rating Summary:
32 Buy, 10 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
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Needham & Company on Semiconductor Stocks: Turning More Defensive on Decelerating Growth Trends
Analyst, Y. Edwin Mok, said, "We are turning more defensive on the semicap group, as we believe order rates from the leading foundry/logic customers are decelerating and we are less confident memory CAPEX will rebound in 2H12/early-2013 to maintain continued growth. Since the beginning of the year, we have warned investors that the semiconductor equipment sector could see no growth or even a pullback in 2H12...With limited visibility, we now believe business will decline in 2H12 and we anticipate modest growth in 1H13. However, we believe the Street’s estimates continue to reflect 2-6% 2H/1H revenue growth in 2H12 and accelerated growth in 1H13. As a result, we believe the risks on Street’s estimates are to the downside. To be clear, we are not calling for a cyclical downturn and do not expect 2H12 to be as weak as 2H11."
"We also see several structural trends driving higher capital spending over the long term. However, we expect semicap stocks to remain limited until expectations are adjusted down to meet our more cautious view. Reflecting our updated sector view, we downgrade Applied Materials (Nasdaq: AMAT) and Ultra Clean (Nasdaq: UCTT) to Hold from Buy, and downgrade Nova Measuring Instruments (Nasdaq: NVMI) to Buy from Strong Buy."
Analyst, Y. Edwin Mok, said, "We are turning more defensive on the semicap group, as we believe order rates from the leading foundry/logic customers are decelerating and we are less confident memory CAPEX will rebound in 2H12/early-2013 to maintain continued growth. Since the beginning of the year, we have warned investors that the semiconductor equipment sector could see no growth or even a pullback in 2H12...With limited visibility, we now believe business will decline in 2H12 and we anticipate modest growth in 1H13. However, we believe the Street’s estimates continue to reflect 2-6% 2H/1H revenue growth in 2H12 and accelerated growth in 1H13. As a result, we believe the risks on Street’s estimates are to the downside. To be clear, we are not calling for a cyclical downturn and do not expect 2H12 to be as weak as 2H11."
"We also see several structural trends driving higher capital spending over the long term. However, we expect semicap stocks to remain limited until expectations are adjusted down to meet our more cautious view. Reflecting our updated sector view, we downgrade Applied Materials (Nasdaq: AMAT) and Ultra Clean (Nasdaq: UCTT) to Hold from Buy, and downgrade Nova Measuring Instruments (Nasdaq: NVMI) to Buy from Strong Buy."
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