| | | I am not endorsing this view, just reporting it.
THE FOLLOWING IS FROM CNBC PRO / CITI ANALYST Christopher Danely:
“We expect the SOX index [to] fall by 30% and hit new lows, driven by EPS [earnings per share] declines and a compression in multiples,” analyst Christopher Danely said in a Feb. 27 note.
He noted that sales from both the industrial end market and data-center end market had declined significantly.
“Sales from the industrial end market for TXN
, NXPI
, ON
and QCOM
all declined double-digits QoQ in 4Q22 and are expected to decline sequentially in 1Q23,” he said, adding that: “Intel
guided its datacenter business down high-teens QoQ, while AMD
guided its data center business down at least 10% QoQ.”
Earnings-per-share estimates for chipmakers this year have declined 32%, Danely said. “We believe Consensus estimates can fall at least another 10%, driven by a correction in the industrial/auto/data center end markets.”
Given this “defensive stance,” the analyst said Analog Devices
remains its top pick in this environment, describing it as the “most defensive name.”
He noted that Analog Devices, as well as Microchip Technology
, had both seen increases in consensus EPS estimates of 5% and 7% respectively – well above the 15% median decline.
Looking ahead, Danely added: “We believe semiconductor stocks will bottom after every company – including ADI and MCHP – cuts estimates, trades close to trough valuations, and cuts capex.”
Stocks with upside potential?
Citi also named a few semiconductor stocks to consider once the dark times are over.
“When the downturn ends, we prefer to own stocks with secularly increasing EPS such as Micron
, ON, GlobalFoundries
and AMD as they should offer the most upside,” Danely said.
Analog Devices, Micron, ON Semi and GlobalFoundries are all buy-rated by the bank.
Micron has the highest potential share price upside from Citi, at 32%. The bank gives Analog Devices, ON Semi, and GlobalFoundries each around 22% upside potential.
Citi has a neutral rating on AMD, and sees its share price falling 1%.
— CNBC’s Michael Bloom contributed to this report. |
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