Barclays Update on U.S. Semiconductor Capital Equipment: Semicon West Recap - Resetting Our Estimates for the Current Mid-Cycle Pause
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Price: $1,765.26 +0.85%
Rating Summary:
25 Buy, 9 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
25 Buy, 9 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays Update on U.S. Semiconductor Capital Equipment: Semicon West Recap - Resetting Our Estimates for the Current Mid-Cycle Pause
Barclays analyst, CJ Muse, said, "Near-Term Macro Headwinds Tempered by Likely 4Q11/1Q12 Order Inflection: As clearly evidenced from comments at the Semicon West trade show earlier this week, the semi equipment group is undergoing a "Pause," led by foundry over-spend, incremental IC inventory build in the channel, and softer-than-expected end demand worsened by ever-increasing macro uncertainty. Importantly, though, we continue to see an inflection in orders in the 4Q11/1Q12 timeframe, believe current valuations reflect much of the bad news already, and that the time to buy semi equipment shares is when fears are greatest. While investors may look now post earnings and/or for resolution to the macro overhang before re-engaging in the names, we continue to expect SPE shares to trade higher exiting CY11. We reiterate top ideas: ASML Inc (Nasdaq: ASML), Lam Research (Nasdaq: LRCX), MKS Instruments (Nasdaq: MKSI), and Teradyne (NYSE: TER)."
Our Top Picks Remain ASML, LRCX, MKSI and TER; We also Like FORM into Earnings: Based on the combination of attractive valuation, the most upside potential to CY12 expectations in CY12, and limited downside risk, our top picks remain ASML (at order trough), LRCX (leverage to NAND; reversion to mean), MKSI (front-end leverage at near trough valuation), and TER (cheap play on connectivity/tablet apps processors/auto/industrial analog). We also like FormFactor (Nasdaq: FORM) into earnings. DRAM capex has been meaningfully weak; the one area of increased spend is for the mix shift to Mobile DRAM and the consequential need for higher ASP probe cards that offer higher parallelism. To this end, we look for FORM to report upside to its September Q outlook when it reports in July. Now we maintain our EW rating as we do not see earnings support for more meaningful upside to shares (as we await success in the flip chip arena), but we do see shares working into earnings on upside from DRAM."
Barclays analyst, CJ Muse, said, "Near-Term Macro Headwinds Tempered by Likely 4Q11/1Q12 Order Inflection: As clearly evidenced from comments at the Semicon West trade show earlier this week, the semi equipment group is undergoing a "Pause," led by foundry over-spend, incremental IC inventory build in the channel, and softer-than-expected end demand worsened by ever-increasing macro uncertainty. Importantly, though, we continue to see an inflection in orders in the 4Q11/1Q12 timeframe, believe current valuations reflect much of the bad news already, and that the time to buy semi equipment shares is when fears are greatest. While investors may look now post earnings and/or for resolution to the macro overhang before re-engaging in the names, we continue to expect SPE shares to trade higher exiting CY11. We reiterate top ideas: ASML Inc (Nasdaq: ASML), Lam Research (Nasdaq: LRCX), MKS Instruments (Nasdaq: MKSI), and Teradyne (NYSE: TER)."
Our Top Picks Remain ASML, LRCX, MKSI and TER; We also Like FORM into Earnings: Based on the combination of attractive valuation, the most upside potential to CY12 expectations in CY12, and limited downside risk, our top picks remain ASML (at order trough), LRCX (leverage to NAND; reversion to mean), MKSI (front-end leverage at near trough valuation), and TER (cheap play on connectivity/tablet apps processors/auto/industrial analog). We also like FormFactor (Nasdaq: FORM) into earnings. DRAM capex has been meaningfully weak; the one area of increased spend is for the mix shift to Mobile DRAM and the consequential need for higher ASP probe cards that offer higher parallelism. To this end, we look for FORM to report upside to its September Q outlook when it reports in July. Now we maintain our EW rating as we do not see earnings support for more meaningful upside to shares (as we await success in the flip chip arena), but we do see shares working into earnings on upside from DRAM."
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