Wednesday November 1 6:06 PM ET
Chip Equipment Makers Fall After Downgrades
NEW YORK (Reuters) - Semiconductor equipment makers took a tumble on Wednesday after Jay Deahna, an analyst with Morgan Stanley Dean Witter, cut ratings and earnings estimates on four bellwether stocks on concerns about low capital spending in the computer chip industry.
Deahna, who lowered his forecast for 2001 global semiconductor capital spending growth to 10-15 percent from 30 percent plus, said in a note to clients that concerns about weakness in personal computer and telecom equipment spending next year was prompting chipmakers to become increasingly cautious regarding their 2001 capital spending plans.
He then downgraded KLA-Tencor (NasdaqNM:KLAC - news), Applied Materials Inc. (NasdaqNM:AMAT - news), Lam Research (NasdaqNM:LRCX - news) and Advanced Energy Industries (NasdaqNM:AEIS - news) to outperform from strong buy ratings.
``It's valid to have concerns about these stocks as lower capital spending will eventually filter down to the chip equipment makers,'' said Henry Asher, a portfolio manager with Northstar Group, which includes semiconductor makers such as Intel Corp. (NasdaqNM:INTC - news) and Analog Devices Inc. (NYSE:ADI - news) among its holdings.
``But this may be a an interesting entry point (to buy equipment makers), as we missed them on the way up and the fundamentals over a long period still seem strong.''
KLA-Tencor fell $1, or 3 percent, to close at $32-13/16; Applied Materials fell $1-7/8, or 3.5 percent, to finish the day at $51-1/4; Lam Research fell 3/4, or 3.9 percent, to $18-5/8; and Advanced Energy Industries slipped 5/16, or 1.8 percent, to $16-15/16.
Deahna also cut his 2001 earnings estimate for Applied Materials to $3.11 a share from $3.90 and his 12-month price target to $60 from $120.
Advanced Energy's earnings expectation for 2001 was lowered to $2 a share from $3, though the target price remained at $45.
KLA-Tencor's earnings view for 2001 was lowered to $2.15 a share from $2.45, with the target price unchanged at $60.
Deahna lowered the 2001 earnings estimate to $1.71 from $2.55. His 12-month target price remained at $40.
``Over the next several quarters, we will likely lower numbers on most of the companies we cover,'' Deahna said in a research note.
Semiconductor stocks were hurt generally after Altera Corp. (NasdaqNM:ALTR - news) said that although sales in October of its specialty semi-conductors rose 15 percent from July, they were below management expectations.
Still, there is some good news ahead, Deahna said. ``Chip industry and macro-economic growth should begin to re-accelerate in 3Q 2001. Equipment stocks should start to sense it sooner.'' |
