See the following from Needham & Co. Isn't this the same Needham & Co. that just raised their rating to "buy" on AMAT? What a difference a day makes. Jeff
<<Chip Gear Stocks Rising Too Fast
--------------------------------------------------------------------------------
Nov 19, 1998 (Tech Web - CMP via COMTEX) -- SAN DIEGO -- It will most likely be a year or more before semiconductor capital equipment spending bounces back, according to industry analyst Theodore O'Neill, who follows the segment at Needham & Co.
Compared to previous business cycles, the recovery from current downturn will not be a "rapid snap-back in terms of bookings," concluded O'Neill, who spoke at a recent technology stock forum for individual investors in San Diego.
O'Neill warned that the recent rally in capital equipment stocks has put some shares ahead of the fundamentals, and they could fall again. Other stock analysts also believe semiconductor and related stocks have become inflated in the recent run-up.
The current downward cycle has been "unique in its severity and magnitude," O'Neill said. "From the bookings' peak in September 1997 to September 1998, it has fallen 68 percent. In terms of bookings, this level hasn't been seen since 1993 when all the companies in this space were a quarter the size they are today.
"It'll take four consecutive quarters of 33 percent growth in orders just to get us back to where we were in September 1997 in terms of level of business," O'Neill added. "There is literally no way you can fire people fast enough to bring the business down to that size and keep up the pace with the decline."
O'Neill said Needham forecasts losses for virtually all the semiconductor equipment companies in 1999, as "front end" makers see a slow ramp-up next year.
In test and assembly markets, suppliers will likely see recovery earlier, according to O'Neill. And he added that the large cap stocks held up much better than small caps. Share prices of Applied Materials and Novellus Systems "have gotten significantly ahead of fundamentals," O'Neill warned.
Capital equipment stocks above the $350 million market cap have bounced back in recent weeks "to four, five, or six times book value and there's no fundamental change in business," he said. "Business still looks very bad.
"On the small cap side, stocks at the bottom were selling recently for book or less than book. Next year, people will wake up and see these smaller caps as good values," O'Neill said.
>> |
