Chip Equipment Stocks Seen With Potential Gains
06.20.06, 12:31 PM ET
Shares of some of the better players in the chip industry have declined to attractive prices, prompting Prudential Equity Group to upgrade certain names.
"We think the current risk-versus-reward scenario is strongly in favor of a significant price appreciation from the current levels," wrote analyst Ben Pang, in a note sent to investors Tuesday.
The research analyst said controls on company spending should limit the risk of over-capacity. And while order rates have reached a top, Pang said, cancellations appear unlikely.
"We think orders will be in the range of approximately 10% in the third- and fourth-quarters," he added. "We think the rational spending behavior and generally shorter lead times limits the chances for order cancellations."
Prudential upgraded shares of Applied Materials to "overweight" from "neutral weight," Brooks Automation to "overweight" from "underweight," and Mattson Technology to "neutral weight," from "underweight."
The semiconductor capital equipment group is trading at 14 times the firm's 2007 estimates, or a 14% discount to historical levels excluding "bubble years."
"Without the threat of equipment cancellations on the horizon, we view this an attractive risk/reward scenario."
The analyst said its top industry picks remain companies focused on lithography, such as Cymer and ASML Holding, both rated at "overweight.`
Applied Materials has a price target of $21 with further upside potential of 28%, Pang noted.
(forbes.com) |
