FBR Capital: Semiconductor Trading Tidbits: AMD, MRVL, QCOM, BRCM, and SLAB; Nvidia Earnings Preview

FBR Capital: Semiconductor Trading Tidbits: NVDA, AMD, MRVL, QCOM, BRCM, and SLAB

FBR analyst said, "In today’s piece we have updated production start checks from Asia, we preview Nvidia’s (Nasdaq: NVDA) calendar 1Q11 earnings results, and we discuss the latest stock thoughts on Intel (Nasdaq: INTC), AMD (NYSE: AMD), NVDA, Marvell (Nasdaq: MRVL), Broadcom (Nasdaq: BRCM), and QUALCOMM (Nasdaq: QCOM). Regarding our production start checks, overall 2Q11 production start revisions were largely neutral versus our prior checks and are set to grow 2%–3% sequentially. Versus our monthago checks we saw production start forecast raises from Marvell (+21%), and Mediatek (+14%), and production start forecast cuts from Nvidia (–9%), Altera (–5%), Broadcom (–4%), Silicon Labs (Nasdaq: SLAB) (–4%), Xilinx (Nasdaq: XLNX) (–3%), and AMD (–2%). On a sequential basis, we see strength in 2Q starts from Mediatek (+22%), Marvell (+21%), Silicon Labs (8%), and Qualcomm (+6%), and we see weakness in 2Q starts from Nvidia (–18%), AMD (–6%), and to a lesser extent Xilinx (–2%). Net, these checks are most positive for Marvell, and most negative for Nvidia, Altera (Nasdaq: ALTR), Broadcom, Silicon Labs, and Xilinx. Regarding chip stocks, we remain constructive on the group as business remains robust, inventories
are lean, and valuations still seem reasonable (13x 2011 P/E for the sector). That said, the group does seem catalyst-light currently with some order choppiness in the handset and optical space, sluggish unit demand in the PC space, and Japanese earthquake impacts still looming overhead. We think the SOX could churn sideways in range of 390–460 through this summer, before breaking out toward 525 by year-end. Key stocks to focus on for potential upside include Outperform-rated Maxim (Nasdaq: MXIM), BRCM, QCOM, MRVL, Fairchild (Nasdaq: FCS), Int'l Rectifier (NYSE: IRF), and Microsemi (Nasdaq: MSCC)."

"Nvidia is set to report its calendar 1Q11 (April) financial results and provide calendar 2Q11 (July) guidance after the market close on Thursday. We generally expect in-line results and guidance, and do not expect this quarter’s report to be a positive catalyst for shares. Rather, we think the risk is that Nvidia’s results and guidance could be a negative catalyst for shares given recent weakening production start checks, still-sluggish consumer PC unit demand, concerns about Intel’s Sandy Bridge product addressing a larger swath of PC makers’ consumer notebook graphics processing requirements, concerns about weak non-Apple (Nasdaq: AAPL) tablet sell through (Xoom and Galaxy Tab 2), impacts from Apple Macbooks moving away from Nvidia chipsets in 1Q11, and any dilutive financial impacts from its recently announced pending acquisition of baseband processor supplier Icera. So, over the short term, we would rather be exposed to MRVL (also reports in May, positive production start revision trends, and low investor expectations) and not NVDA, though we do think Nvidia is building interesting and highly profitable businesses in Quadro (workstation GPU) and Tegra (application processors), and with great potential in its Tesla (parallel compute) and now baseband efforts. We would find shares more attractive below $15, and think owners should trim shares over $22."

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