AmTech Upgrades Semiconductor Sector to Overweight (TXN, INTC, AMD, QCOM, more)

Broadpoint.AmTech is out with a research note today raising its investment rating on the Semiconductor sector from Equal Weight to Sector Overweight. The firm believes that true demand will stop declining at down about 20% on a year-over-year basis given expectations that semiconductor average selling prices will "largely remain on a stable curve".

In order for Broadpoint.AmTech to be right about its 20% year-over-year demand destruction, it notes that a second half snap-back would be required in order to support demand levels. On the other hand, the firm admits that if it is wrong and demand bottoms out lower, it sees a "re-test of the lows as inventory burn will be slower and demand recovery will occur from a lower level." Keeping this in mind, Broadpoint.AmTech believes that "semiconductor investors will be correct to be long on semis before a 2H09 recovery" as demand destruction levels will not be measurable until Q209.

Broadpoint.AmTech is estimating for sequential shipment declines of 23% in December, followed by down 13% in March. The firm sees CY09 shipments falling 20%, as previously mentioned, with a limited snapback of 15% in CY10.

The firm recommends investors use the next 6 weeks to build positions in its Buy rated names:

• Monolithic Power Systems (Nasdaq: MPWR) - Broadpoint.AmTech's favorite fundamental growth story
  
• Micrel (Nasdaq: MCRL) - sees its product cycle as muted by broader market issues
  
• Maxim Integrated Products (Nasdaq: MXIM) - currently yields nearly 6.5%
  
• Intersil (Nasdaq: ISIL)
  
• National Semiconductor (NYSE: NSM)
  
• Texas Instruments (NYSE: TXN) - improving its long-term business model
  
• Cypress Semiconductor (NYSE: CY)
  
• Atmel (Nasdaq: ATML)
  
• Microchip Technology (Nasdaq: MCHP) - calls the above 3 stocks "the best value presently found" in the MCU space
  
• OmniVision Technologies (Nasdaq: OVTI) - trading at a discount to cash. Also sees ASP's holding up better than expected given an improving high-end mix
  
• Qualcomm (Nasdaq: QCOM) - calls the company "a secular grower interrupted by the macro slow-down"
  
• Marvell (Nasdaq: MRVL) - a recovery play on disk drives and smart phones
  
• Advanced Micro Devices (NYSE: AMD) - waiting for improved execution to deliver better than expected results

The firm also has several Neutral rated stocks within in semi space:

• Intel (Nasdaq: INTC)
  
• NVIDIA (Nasdaq: NVDA)
  
• Linear Technology (Nasdaq: LLTC)
  
• Analog Devices (NYSE: ADI)

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