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From Briefing.com....SEMICONDUCTOR EQUIPMENTS STOCKS. A shot of cold water (and reality?) for one of the hottest tech sectors. Before the open Monday, Morgan Stanley Dean Witter downgraded some major semiconductor capital equipment makers from "outperform" to "neutral," saying they have run up too far too fast. The stocks are: ASM Lithography (ASMLF 25 1/2), Dupont Photomasks (DPMI 36 1/4), KLA Tencor (KLAC 36 7/8), and Lam Research (LRCX 14 7/16). Indeed, many of these stocks have shot up over just the past month despite only modest signs of an upturn in the semiconductor sector. One problem for these companies is that a decent rebound in business for semiconductor stocks may not produce a whole lot of demand for capital equipment. A strong rebound may be necessary to get the equipment sector back on a solid growth track. The SOX semiconductor index, which includes some of these equipment maker stocks as well as semiconductor stocks, has shot up 30% in just the past month. The stocks that Morgan Stanley is downgrading have all nearly doubled in price. Optimism in the semiconductor sector certainly is warranted, but Dean Witter is suggesting that perhaps the optimism has turned into excessive speculation. In fact, almost all of these stocks latest earnings reports show little profit or a loss. Granted, a turnaround might be imminent, but the degree of the rebound in profits might not be sufficient to warrant making these stocks continued outperformers. Brokerage companies take a lot of flak when they make ratings changes after news or a price move, so Briefing.com gives Morgan Stanley their due in courageously downgrading these stocks in the face of upward momentum. This move is likely to have only a small impact on this sector or technology stocks in general today, but may well prove prescient. |
