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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (4648)	12/26/2002 3:38:33 PM
From: Proud_Infidel	Respond to of 25522

S&P's view of Semi-Equipment.....FWIW Semiconductor-equipment stocks have had a rough year so far in 2002. Hopes for a vaunted second-half recovery were roundly squashed, as demand for electronics goods -- such as personal computers, cellular phones, and networking equipment -- remained weak. By October, equipment stocks had fallen an average of 50% year to date. Since then, another rally has begun, this time anticipating a recovery in 2003. We still have an underweight recommendation on the group. Our reasoning is as follows: First, although we expect continued growth in chip-unit volume in 2003, we expect semiconductor pricing to remain under pressure because of continued excess manufacturing capacity, slow growth in corporate IT spending, and a general deflationary economic tendency. Pricing pressure leads to poor profitability and decreased spending by chipmakers. Second, we expect lower growth rates in the electronics industry in general, due to the lack of a "killer application" and the overall maturation of the industry. Finally, we note that valuations for chip-equipment companies remain high. Applied Materials (AMAT , ranked 1 STAR, or sell), for example, currently sells at 4.8 times trailing sales, well above its historical average of 4.0 times, an average that includes 1999-2000 "bubble" valuations. What would change our minds? We would want to see signs of a sustainable increase in equipment orders supported by clear signals of growth in electronics end-markets. Or valuations for semiconductor-equipment stocks would need to return closer to those seen at the trough of an industry cycle. On the positive side, we do believe that the semiconductor industry is beginning to recover and would make initial investments in companies tied more directly to either chip unit volume growth or increases in integrated circuit design activity. Along these lines, we like the EDA (chip design) software companies, our two favorites being industry leaders Synopsys (SNPS ) and Cadence Design (CDN ), which are both ranked 4 STARS (accumulate). Both companies stand to benefit as chipmakers see an improving economy and design new products for the next up-cycle. We also like Photronics (PLAB ), the leading maker of photomasks, which will benefit as new chip designs go into production. The stock is ranked accumulate. Finally, we would mention Amkor Technology (AMKR ), the leading provider of chip-packaging services. The company, which we also rank accumulate, stands to benefit directly as the volume of chips produced rises. yahoo.businessweek.com