Goldman Sachs Argues That Semiconductor Stocks are Cheap, Cheap, Cheap

Goldman Sachs made positive comments on the semiconductor sector today, saying that recent PC supply chain datapoints pointing to a slowdown are more noise than a cause of concern.

Stocks in the sector have sold off considerably on the recent reductions to ODM notebook orders in April and early May, and the group is now trading at a forward P/E multiple of 11x and 10x ex-cash, which is a 10% discount to the S&P 500. The group is also trading at a 45% discount to prior cycles, according to the firm.

Instead of estimates coming down, Goldman sees estimates moving higher as they remain well below both normal seasonality and end market forecasts. The firm sees 10-15% upside to estimates as the "most likely case."

The firm sees 30-35% upside to select PC and handset names and would be aggressive buyers of Marvell Technology Group Ltd. (Nasdaq: MRVL), Broadcom Corp. (Nasdaq: BRCM), ON Semiconductor Corp. (Nasdaq: ONNN), and Texas Instruments Inc. (NYSE: TXN).

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