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Technology Stocks : Semi Equipment Analysis

SOXX 303.84

+1.3%

Dec 22 4:00 PM EST

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To: Donald Wennerstrom who wrote (15468)	5/28/2004 6:03:48 PM
From: Donald Wennerstrom	of 95626

And here is the update from CSFB. May 28, 2004 <<Mid Qtr - Upside tracking Ups 2Q guidance. NVLS updated 2Q guidance on its mid-quarter conference call post the market close. The company raised June quarter revenue and EPS to $325-335 mm (up 24-27% q/q) and $0.25 to $0.27 versus prior guidance of $305-325 mm and $0.18 to $0.20 ($0.21 to $0.23, excluding 3c one-time charge), and our prior estimates of $325 mm and $0.20. Street consensus was $318 mm and $0.21. Shipments were guided to $360-370 mm (up 16-19% q/q) versus our estimate of $350 mm. We believe accelerating bookings and shipments in PVD and ECP to the major foundries is driving upside to June estimates. 2Q orders – in line to better. Management increased the low-end of the range for bookings – guiding orders to $380-390 mm (up 10-12% q/q) while indicating possible upside to $400 mm plus which implies 15% plus sequential order growth. NVLS originally guided for orders of $375-390 mm versus ours and the consensus estimate of $390 mm. We previewed that 2Q order guidance was at least tracking for NVLS; equipment companies in our conference this week – were incrementally more positive on 2Q bookings and 2H04 outlook. Outlook 3Q and beyond. NVLS noted particular order strength in Japan, Korea, and the U.S. We have been expecting order rates in the U.S. to pick up based upon capacity build out at Intel (Fab 24) and Micron (Manassas). NVLS also noted that long-dormant Europe could pick up in the September quarter. Management expressed the likelihood that orders could be up again in the September quarter, although didn’t rule out the possibility for down orders as well – especially if 2Q orders are stronger. Estimates and valuation. Street numbers – at least in the June and September quarters are likely to be revised up this morning. We are raising our 2004 and 2005 estimates from $0.85 and $0.80 to $1.00 and $1.00, respectively. Street was at $0.97 and $1.58 prior to the call. Our 2005 EPS implies 4% y/y revenue growth, consistent with our bottom up estimates for flat to down semi capex in 2005 and 5% WFE revenue growth. NVLS is trading at a 32 times our revised 2005 EPS and 21 times street consensus versus the peer group at 21 times and 13 times, respectively. Stock should trade up on higher 2Q outlook – but relative valuation, and lack of resolution on cycle duration could limit additional upside to the stock.

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