AmTech Upgrades Semiconductor Sector to Equalweight (TXN, CY, NSM, ADI, SMTC)

This morning, American Technology Research upgraded the semiconductor sector from Underweight to Equalweight, saying that risk is accurately priced in and upside reward now outweighs downside risk. Although the firm sees challenging December and March quarters, AmTech believes value investors can now cautiously start building positions in certain semi names in anticipation of a mid-'09 fundamental bottom.

The firm believes sentiment related to semi stocks is "now sufficiently negative... as they have had full exposure to the recent credit market crisis and market volatility", noting that its coverage universe is down 28% since AmTech downgraded the sector to Underweight on Sept. 12. Further, AmTech points out that semi vendors have quickly responded to revenue declines by aggressively controlling certain cost measures.

AmTech says "this is not the 'semi's are cheap off historic multiples' call, it is that semi's have taken their medicine and are responsibly planning for the worst and hoping for the best..." The firm believes that the semi sector could actually outperform moving forward if macro conditions stabilize.

AmTech made several changes to individual stock ratings/estimates in the semi sector:

• upgraded Texas Instruments (NYSE: TXN) from Neutral to Buy, and raised its price target from $18 to $24 (here is StreetInsider.com's summary of the upgrade)
  
• upgraded Cypress Semiconductor (NYSE: CY) from Neutral to Buy, and raised its price target from $5.50 to $7.50 (here is StreetInsider.com's summary of the upgrade)
  
• trimmed estimates on National Semiconductor (NYSE: NSM), reflecting "the near-term impact of macroeconomic weakness and the credit market crisis that has reduced order visibility in the analog sector across broad end markets"
  
• lowered its price target on Analog Devices (NYSE: ADI) from $31 to $26
  
• cut its target on Semtech (Nasdaq: SMTC) from $14 to $14.50

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