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Nomura Securities on U.S. Semiconductors: Cautious on Xilinx (XLNX) & Intel (INTC); Favor Apple's (AAPL) Supply Chain

July 12, 2012 8:58 AM EDT Send to a Friend
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Nomura Securities on U.S. Semiconductors: Cautious on Xilinx (Nasdaq: XLNX)

Analyst, Romit Shah, said, "We cannot make a fundamental argument for being long any semiconductor stocks in today’s environment where global GDP growth is decelerating. Overall, we expect Q3 revenue guidance to be 3-7 points below normal seasonality. We are cautious on Intel shares (Reduce/$25 TP) into earnings next week. We believe MPU ASPs, which have been a major revenue driver over the past two years, are starting to roll over. We expect sub-seasonal revenue growth from Intel in Q3, and are lowering our revenue estimate to up 5% in Q3. We are also cautious on shares of Xilinx (Neutral/$30 TP), which we think will be one of the few companies that guide Q3 down sequentially. It is trading at a larger than normal premium on EV/sales (+23 vs. avg of +11%). Our estimates decrease from $596mn/$0.48 to $565mn/$0.43 in Q3 and from $2.68bn/$2.40 to $2.44/$2.00 in 2013. Our new target price of $30 is based on a multiple of 15x CY13."

"On a relative basis, we believe the GDP plays (Analog Devices (NYSE: ADI), Altera (Nasdaq: ALTR), Intel (Nasdaq: INTC), Linear (Nasdaq: LLTC), Maxim (Nasdaq: MXIM), TI (NYSE: TXN), XLNX) have more downside than the Apple supply chain (Avago (Nasdaq: AVGO, Broadcom (Nasdaq: BRCM), QUALCOMM (Nasdaq: QCOM)) and secular losers (AMD (NYSE: AMD), Atmel (Nasdaq: ATML), Marvell (Nasdaq: MRVL), NVIDIA (Nasdaq: NVDA)), which are down 26% on average over the past three months."

"We are cautious on Intel shares (Reduce/$25 PT) into earnings next week."

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