Here is another point of view on the semi-equip stocks.
<<Schwab Soundview Capital Markets(AMAT, CYMI, KLAC, LRCX, NVLS, TER, and TSM) JAGfn.com
14 May 2004, 08:12am ET
Semiconductor Industry: Despite 45% year-over-year equipment spending growth, we believe wafer capacity growth remains in-line with end-market growth at about 15% year over year. With no overcapacity building, we believe the current semiconductor cycle could last into 2005 and beyond if end-market demand remains robust.
Many of the leading equipment stocks are trading at attractive valuations after recent pullbacks. - Initiating coverage of the semiconductor equipment and manufacturing sector. - Our analysis suggests that despite a 45% year-over-year equipment spending growth in 2004, aggregate wafer capacity growth remains about in-line with end-market unit growth at 15% year over year.
Our analysis also suggests overcapacity is unlikely if 2005 capital spending growth remains at 25% year over year. - With no overcapacity building, we believe the current semiconductor cycle could last into 2005 and beyond. - In the near term, order growth could be flattish quarter over quarter.
Given the steep pullback in equipment stocks, we believe the slowing order growth has already been discounted at the current prices. Given the mostly attractive relative valuations of equipment stocks, our outperform rated equipment stocks are likely to see postive appreciation from the current levels.
We view the recent pullbacks as a buying opportunity for those names. - We are assigning Outperform stock ratings to AMAT, CYMI, KLAC, LRCX, NVLS, TER, and TSM due to their attractive valuations (both overall and relative valuation to other technology stocks) and key design wins. Out top front end equipment picks are LRCX and NVLS, our top back end equipment pick is TER and our top foundry pick is TSM.>> |
