Analog Devices (ADI) Citi's Preferred Semiconductor Pick

Citi analyst Christopher Danely told investors in a note Monday that the firm sees four semiconductor stocks to own coming out of the downturn.

Danely explained the "SIA announced September monthly sales of $49.4 billion (up 3.9% MoM), below seasonality of up 10.9% MoM and our estimate of $51.7 billion (up 8.9% MoM) driven by below-seasonal sales across the board, except Flash. As a result, 3Q22 semi sales declined 6% QoQ, well below seasonality of up 6% QoQ and was the second consecutive quarter of sequential decline."

As a result of the lower-than-expected revenue, Citi lowered its 2022 semiconductor sales estimate from up 6% YoY to up 5% YoY.

The analyst stated that the firm remains cautious on semis due to inventory build and recession and reiterated Analog Devices (NASDAQ: ADI) as its top pick "given its defensive nature."

In addition, he pointed to Micron Technology (NASDAQ: MU), ON Semiconductor (NASDAQ: ON), GlobalFoundries (NASDAQ: GFS), and Advanced Micro Devices, Inc. (NASDAQ: AMD) as stocks to own coming out of the downturn.

"Whenever the stock downturn ends, we prefer to own stocks with secularly increasing margins and/or EPS such as Micron, ON, GLOBALFOUNDRIES (NASDAQ: GFS) and AMD as they should offer the most upside," the analyst wrote.

By Sam Boughedda

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