AmTech Downgrades Semiconductor Sector to Underweight (INTC, AMD, NVDA, MCRL, more..)

September 12, 2008 1:34 PM EDT

American Technology Research downgraded the entire semiconductor sector to Underweight this morning, citing "a more conservative back-to-school assumption, weakness in PCs (enterprise and US consumer), slower handset growth, and the potential for higher inventory to limit upside..." The firm believes that a completely new round of material estimate cuts are likely coming to the semis as analysts will need to "macro factors that are likely to limit consumption of discretionary electronic devices."

AmTech said its thesis on the semis has now changed: the firm will only focus on "catalyst stories or those few names where longer-term investors are likely to set valuation bottoms." AmTech lowered its overall semiconductor revenue growth in CY09 from 5.7% to 0.5%, while its analog, personal computing, microcontroller and memory growth estimates go from 7.4%, 5.8%, 10.6% and 5.7% to 2.1%, 1.5%, 3.9% and 0.5%, respectively. The firm said, "Our EPS adjustments reflect lower revenue as well as potential gross margin pressures (for those with undifferentiated products), offset by operating expense controls."

The firm downgrades:

• Analog Devices (NYSE: ADI) from Buy to Neutral and lowers price target from $37 to $31, citing flat growth expected in FY09.
  
• Cypress Semiconductor (NYSE: CY) from Buy to Neutral, citing uncertain share dilution effects from employee RSA adjustments.
  
• Intel Corp. (Nasdaq: INTC) from Buy to Neutral and lowers price target from $27.50 to $20, citing near-term headwinds of mix shift and 32nm capex investments.
  
• Linear Technology (Nasdaq: LLTC) from Buy to Neutral and lowers price target from $41 to $32, saying the company's business model is already almost fully optimized, meaning it will be susceptible to a potential slowdown in target markets.
  
• Maxim Integrated Products (OTC: MXIM) from Neutral to Buy from $27 to $21, saying "the law of large numbers slows growth for this large-cap analog company. MXIM is more likely an acquirer if analog consolidation were to occur."
  
• Micron Technology (NYSE: MU) from Neutral to Buy from $9 to $5.50, saying demand drivers have yet to materialize.
  
• NVIDIA (Nasdaq: NVDA) from Neutral to Buy from $26 to $11, citing concerns with the company's high-volume fabless model that keeps nVidia "at least a half-node behind slower ramping /lower volume customers".
  
• Semtech (Nasdaq: SMTC) from Neutral to Buy from $20 to $14, citing limited leverage to the company's model " given the fab-lite operations and need to invest in near-term new products for longer term growth."
  
• SanDisk (Nasdaq: SNDK) from Neutral to Buy from $25 to $18, citing an oversupply situation.

The firm upgrades:

• Micrel (Nasdaq: MCRL) from Neutral to Buy, calling the stock a "small-cap semiconductor growth and restructuring story" which has fallen recently and looks attractive.

The firm reiterates Buy ratings on:

• Advanced Micro Devices (NYSE: AMD) with a $10 price target
  
• Atmel (Nasdaq: ATML) and lowers price target from $7 to $5
  
• Monolithic Power (Nasdaq: MPWR) and lowers price target from $33 to $27
  
• Microchip Technology (Nasdaq: MCHP) and lowers price target from $40 to $38
  
• Intersil (Nasdaq: ISIL) and lowers price target from $31 to $22
  
• National Semiconductor (NYSE: NSM) and lowers price target from $32 to $22

The firm Reiterates Neutral ratings on:

• OmniVision Technologies (Nasdaq: OVTI) and raises price target from $11 to $12
  
• Qimonda (NYSE: QI) with a $2 price target
  
• Texas Instruments (NYSE: TXN) with a $24 price target.

Related Categories

Analyst Comments
Insiders' Blog

Stocks Mentioned

Related Entities

• American Technology Research

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?