Communications Chip Stks Slide After Merrill Note:
NEW YORK -- A Merrill Lynch note painting a bearish short-term outlook for communications semiconductor makers sent the sector's stocks lower Thursday morning.
Merrill analyst Joseph Osha cited inventory buildup in lowering his price targets and near-term ratings on several communications chip manufacturers. He took his near-term ratings on Applied Micro Circuits Corp. (AMCC), PMC Sierra Inc. (PMCS), TranSwitch Corp. (TXCC), Broadcom Corp. (BRCM) and Vitesse Semiconductor Inc. (VTSS) to accumulate from buy. He cut his price targets on all those stocks, in addition to Exar Corp. (EXAR) and Conexant Systems Inc. (CNXT), which he kept at near-term accumulate. He maintained a long-term buy rating on all seven stocks.
"While many of the stocks in this group are already down by 50% over the past several weeks, we believe that inventory concerns, coupled with telecom service provider capital spending concerns, will weigh on the group for the next one to two quarters," he wrote, adding that the group was still the most expensive in the semiconductor industry.
However, Osha remains confident about the group's long-term outlook.
"The Internet, deregulation, and the move to outsourcing silicon will provide strong demand for the group over the next several years," he wrote.
Recently, shares of Applied Micro Circuits traded at $66.88, down 5.8%, while those of PMC Sierra fell 7.7% to $121. TranSwitch shares had lost 6.6%; Conexant shares, 3.3%, and Exar shares, 6.4%. Curiously, shares of Vitesse Semiconductor had risen 2.2% to $72.25. |
