Chip and chip-equipment stocks rally on upgrade
SAN FRANCISCO, June 27 (Reuters) - Shares of semiconductor
and semiconductor-equipment companies rose on Thursday after
Lehman Brothers upgraded the chip group and Bear Stearns said
it believed that many chip-making equipment stocks were
oversold.
"After starting to become negative on semiconductors and
computer hardware names in (the third quarter of 2000), we
believe investors now realize that end-demand is not improving
much till 2003 at the earliest and more importantly are
starting to give valuations to a few names that are appropriate
for this low growth scenario by being near historic lows,"
wrote Dan Niles of Lehman Brothers in a note to clients.
As a result, Lehman moved to a "market weight/slight
overweight" position from an "underweight position" in
semiconductors, Niles wrote, adding that while chip revenues
bottomed year over year and started improving last August,
valuations haven't started to reach a compelling level until
now.
The benchmark Philadelphia Semiconductor Index <.SOXX> rose
11.8 percent to 394.5. Among the biggest gainers were Applied
Materials Inc. <AMAT.O>, the biggest producer of chip-making
equipment, which rose 97 cents, or 5.1 percent, to $19.96.
Another chip-equipment maker, Lam Research Corp. <LRCX.O>, saw
its stock rise 84 cents, or 4.8 percent, to $18.34.
"We still think the semiconductor equipment stocks in
general are oversold," Bear Stearns analyst Robert Maire wrote
in a note to clients on Wednesday.
Bear Stearns recommended investors aggressively buy shares
of Amkor Technology Inc. <AMKR.O>, saying they were selling for
just a bit more than half their year-low price following the
Sept. 11 attacks on the United States. Amkor shares rose 45
cents, or 8.6 percent, to $5.66.
Mattson Technology Inc. <MTSN.O>, a supplier of
semiconductor processing equipment, is also quite attractive,
relative to its recent peak valuation, Bear Stearns said. Its
stock rose 17 cents, or 4 percent, to $4.37.
Lehman's Niles upgraded Micron Technology Inc. <MU.N>, the
No. 2 maker of memory chips, to "strong buy" from "buy," and
Integrated Circuit Systems Inc. <ICST.O> to "strong buy" from
"buy." Micron shares rose $1.50, or 7.9 percent, to $20.50.
Integrated Circuit stock rose $2.24, or 12.4 percent, to
$20.24.
Niles cited four reasons for upgrading his firm's sector
rating on the chip sector. First, chip revenues, unit shipments
and average prices started to hit a bottom starting in August,
and investors are now adjusting to slower-than-expected growth
in 2002, with the best example being Intel Corp.'s <INTC.O>
lowering of revenue guidance for the second quarter earlier
this month.
Second, Niles is forecasting growth in the second half of
this year and during next year for personal computers, wireless
and enterprise networking markets. Third, inventory levels are
reasonable, though not low. Finally, Niles wrote he believed
investors are giving stocks the valuations that are consistent
with the slower growth expected over the next several years.
Analog chipmaker Linear Technology Corp. <LLTC.O> rose,
climbing $1.84, or 6.3 percent, to $31.02. Rival Maxim
Integrated Products Inc. <MXIM.O> gained $1.36, or 3.7 percent,
to $38.25.
Diversified chipmaker National Semiconductor Corp. <NSM.N>
rose $1.54, or 5.5 percent, to $29.57, while rival Texas
Instruments Inc. <TXN.N> gained 44 cents, or 1.8 percent, to
$24.67.
Intel edged up 4 cents, to $18.65, following Niles'
reduction in earnings estimates for the chipmaker for this year
and 2003. Citing excess channel inventories of PCs and weak
demand in the consumer and European markets, he trimmed his
2002 earnings-per-share estimates to 57 cents from 60 cents and
2003 estimates to 83 cents from 90 cents.
Shares of Advanced Micro Devices Inc. <AMD.N>, Intel's
chief rival in the market for microprocessors, edged up 8 cents
to $9.05.
((-- Duncan Martell, San Francisco bureau, 415 677-2536,
duncan.martell@reuters.com))
REUTERS
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