PaineWebber bullish on semiconductor equipment firms
By Nicole Volpe
NEW YORK (Reuters) - The semiconductor equipment industry is in the midst of a strong cyclical upturn, with industry growth this year likely to exceed 70 percent, far above longer-term growth rates of 15 percent, PaineWebber analyst Tim Summers said on Tuesday.
As chipmakers strain to meet booming demand for chips in personal computers, handheld devices and cell phones, they allocate much of their spending on new facilities and equipment to expand capacity, benefiting the semiconductor equipment sector.
Summers said such capital expenditures by semiconductor makers, which as a rule experience wide swings in year-to-year growth, is set to increase 70 percent this year, compared to 14 percent growth in 1999. He forecast a 30 percent rise in capital spending in 2001.
``We believe the industry is in the 'middle innings' of the current cyclical upturn and that above average growth remains highly likely for the foreseeable future,'' Summers wrote in a note to clients.
He initiated Applied Materials Inc. , the largest supplier of semiconductor manufacturing equipment, with a ``buy'' rating and a $105 per share 12-month price target. He started Advanced Energy Industries Inc. , the largest publicly traded component supplier to the semiconductor equipment industry, with a ``buy'' rating and a $60 per share 12-month price target.
Applied Materials, the bellwether of the industry, opened up 1 at 76-7/8.
``We believe (Applied materials) will grow at least as fast as the industry,'' Summers wrote.
Advanced Energy was unchanged at 45.
Applied Science and Technology Inc., a supplier of reactive gas, power modules and process systems, was started with a ''buy'' rating and a $35 per share 12-month price target.
``(Applied Science) should continue to gain market share as the leading original equipment manufacturers outsource a greater amount of component design and manufacturing to select component suppliers,'' Summers wrote.
ATMI Inc. ,a supplier of specialty materials and consumables used in chip manufacturing processes, was also started with a ''buy'' rating and a $50 per share price target.
Applied Science rose 5/8 to 17-7/16, and ATMI opened up 3/16 at 25-15/16.
Helix Technology Corp., the dominant supplier of cryogenic vacuum pumps and related peripheral devices to the chip equipment industry, and MKS Instruments Inc. one of the largest suppliers of gas instrumentation devices, systems and related components, were also started with a ``buy.'' Summers set a $60 per share 12-month price target for Helix and a $50 per share 12-month price tarket for MKS.
Helix rose 9/16 to 33-1/16. MKS rose 13/16 to 26.
PaineWebber started Novellus Systems Inc. with an ''attractive'' rating, and a $60 per share 12-month price target. Novellus rose 1/2 to 54-7/16 at the open of trade on Nasdaq.
Summers said that the semiconductor industry is out of excess capacity, with the industry operating at over 95 percent utilization - ``well above optimal levels and has resulted in a rash of new fabrication facility construction.''
``The long lead times required to construct these greenfield fabs combined with continued strong semiconductor demand lead us to conclude that semiconductor industry capacity will likely remain tight through 2001,'' he wrote.
Summers said that demand for personal computers, cell phones, personal digital assistants and other electronic products remains strong.
``Layered on top of this is robust demand for networking and Internet-infrastructure equipment and systems,'' he said. |
