iPhone Demand Seen as Headwind for Asia Supply Chain - Pacific Crest (AVGO) (CRUS) (INVN) (SYNA)

Pacific Crest analyst Michael McConnell said quarterly Asia supply-chain findings were positive for Qualcomm (NASDAQ: QCOM), NVIDIA (NASDAQ: NVDA), and ON Semiconductor (NASDAQ: ON).

Pacific Crest lowered estimates for Broadcom Ltd. (NASDAQ: AVGO), Cirrus Logic, Inc. (NASDAQ: CRUS), InvenSense (NYSE: INVN), and Synaptics (NASDAQ: SYNA) due to iPhone demand.

Other companies mentioned cautiously were Advanced Micro Devices (NASDAQ: AMD), Cavium (NASDAQ: CAVM) -- which had its price target lowered to $70 -- Intel (NASDAQ: INTC), Qorvo (NASDAQ: QRVO), and Xilinx Inc (NASDAQ: XLNX).

"Our quarterly Asia supply-chain findings left us incrementally more positive on NVDA, ON and QCOM. Conversely, we believe weak iPhone demand puts estimates at risk for AVGO, CRUS, INVN and SYNA, for which we are lowering estimates. We are also lowering our estimates and targets for CAVM on given delays in ARM servers and for XLNX given weakening demand in wireless infrastructure," said McConnell.

"Given the magnitude of sequential decline in Q1 unit shipments at notebook ODMs, the sub seasonal and back-endloaded shipment forecast for Q2, and relative sales exposure (notebook CPUs ~25% of Intel revenue, ~15% of AMD revenue), we believe consensus estimates for Intel and AMD appear too high. While concern over near term fundamentals at Intel is warranted, we remain constructive on the stock over the longer term given: (1) secular growth trends remain intact in DCG (~50% of operating profits), specifically at cloud and networking customers, (2) optionality on future wireless losses, and (3) an attractive dividend yield of 3.2%," continued the analyst.

McConnell added, "We are lowering our estimates for Broadcom to reflect concerns associated with a weakening Apple (NASDAQ; AAPL) iPhone supply chain and, to a lesser extent, weakening macro demand trends in enterprise and storage . We still view AVGO as one of the best stories in semiconductors this year with a clear line-of-sight toward robust growth in the iPhone 7 driven by carrier aggregation and limited EPS downside given the anticipated $750 million in synergies from its merger with BRCM. We recommend investors own AVGO and see upside to our $170 price target, which is based on 14x our C2017 EPS estimate of $12.71."

For an analyst ratings summary and ratings history on Cavium Networks click here. For more ratings news on Cavium Networks click here.

Shares of Cavium Networks closed at $59.60 yesterday.

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