Semiconductor Trading Tidbits: BRCM, MRVL, NVDA,AMD

May 23, 2011 1:54 PM EDT
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Price: $58.51 --0%

Rating Summary:
    11 Buy, 22 Hold, 2 Sell

Rating Trend: = Flat

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Semiconductor Trading Tidbits: BRCM, MRVL, NVDA, AMD

FBR Analyst says, "In today's report we review recent back-end assembly/test checks with a major supplier and discuss implications for Broadcom, Marvell, AMD, Nvidia, Mediatek, and Xilinx (Nasdaq: XLNX). In aggregate, we see 2Q11 backend packaging requirements growing by roughly 5% sequentialy, with 3Q11 packaging requirements growing by roughly 6% sequentially, about seasonally normal. In aggregate, we see the most strength from AMD and Marvell, while we see weakness forming for Nvidia. Broadcom production reflects weakness in 2Q11 and then a solid recovery in 3Q11. See below for more detail. Regarding chip stocks, we remain constructive on the group for post-Labor Day goodness as business remains generally robust, inventories are lean, and valuations reasonable (13x 2011 P/E for the sector). That said, the group does seem catalyst-light currently with a general summertime malaise, some order choppiness in the handset and optical space, sluggish unit demand in the consumer PC space, and Japanese earthquake impacts still looming. We think the SOX could churn sideways in range of 390–460 through this summer, before breaking out towards 525 by year-end. Key stocks to focus on for potential upside include Outperformrated Broadcom (Nasdaq: BRCM), Marvell (Nasdaq: MRVL), ON Semi (Nasdaq: ONNN, QUALCOMM (Nasdaq: QCOM), and Maxim (Nasdaq: MXIM)."

"BRCM (Outperform) -- For Broadcom, our contacts now see 2Q11 production trending -16% QOQ, and 3Q11 production trending +20% QOQ. We hear that Broadcom's weaker 2Q'11 production trends are the result of baseband weakness at Nokia (NYSE: NOK), with some connectivity combo chip impacts too. For 3Q'11, however, we hear Broadcom has increased both connectivity and baseband production, suggesting to us that Broadcom's wireless weakness is likely to be a one quarter correction."

"MRVL (Outperform) -- For Marvell, our contacts now see 2Q11 production trending +19% QOQ, and 3Q11 production trending +13% QOQ, both indicative of the need for more product on hand near-term...We also hear Marvell may be benefiting from new hybrid storage controller chip socket wins (combined SSD and HDD controller) in notebooks for Dell and/or Hewlett Packard (NYSE: HPQ)."

"NVIDIA (Nasdaq: NVDA) (Market Perform) -- For Nvidia, our contacts now see 2Q11 production trending +7% QOQ, and 3Q11 production trending down a meaningful -36% QOQ . We hear that Nvidia has started too many GPU wafers in 1H'11, and will reduce production (front-end and back-end) near-term as it deals with excess internal inventory. Additionally, we hear AMD is positioned to take notebook GPU market share in 2H'11 from Nvidia, in direct contrast to what Nvidia's management team is saying. Finally, we do think Intel's better graphics functionality embedded into Sandy Bridge means that the entire discrete GPU market could be under some pressure as notebook vendors use more integrated graphics in an effort to get cheaper, lighter, and in thinner in the fight against tablets."

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