Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (9952)	6/2/2003 9:13:14 PM
From: Return to Sender	Read Replies (2) \| Respond to of 95640

Semiconductor Equipment . . . Bank of America on semiconductor equipment makers. Banc of America commented that Applied Materials, Lam Research, Novellus, Taiwan Semi could climb another 30%. Based on firm's estimation, KLA-Tencor is the most extended stock on a valuation basis and will likely run into resistance in the $48 area. Planar Systems was cut to Buy at Needham based on valuation; shares are up 73% since mid-April. The stock is near their price target of $24. SIA data for April. Total semiconductor revs +7.5% Year/Year, -25.1% Month/Month; units +1.2% Year/Year, -15.3% Month/Month; ASPs +6.3% Year/Year, 11.3% Month/Month. This is somewhat weaker than updated forecast of 10-14% revenue growth in 2003 (units up 13-15% and ASPs down 1-3%). Would not read too much into this as the first month of the Quarter is typically weak. Data for the first Quarter was at the high end of our forecast range. Continued strength in unit growth is a positive the semi capital equipment industry as it reflects strong wafer demand that is gradually soaking up excess capacity and causing utilization rates to rise. Semiconductors . . . HP Compaq to include Broadcom gigabit etherent controllers. The company announced its NeXtreme Gigabit Ethernet controllers will now be included as a standard component in HP Compaq's business desktop d330 and d530. Intel shares might be priced too high in light of recent concerns over chip demand – Barron’s reported. The article suggested INTC's recent stock price appreciation could be of concern given factors in Taiwan such as motherboard shipments dropping with very limited visibility. While Intel receives a very small portion of its revenues from motherboards, the company receives 80% of its sales from processors and related semiconductors which clip onto the motherboards. However, the co still maintains its forecast of $6.4-7.0 billion despite the recent concerns over declines in motherboard demand. The article describes the "gap" between INTC's expectations and motherboard manufactures and distributors large enough to drive a truck through. In addition, a Bear Stearns analyst predicts motherboard sales to be down 15% this quarter and suggests, "second quarter weakness is not priced into the stock". Intel reports its mid-quarter update this week. Advanced Micro was cut to Sell at Banc of America based on their belief that AMD's 2nd quarter is tracking below expectations, and that the company will continue to face an uphill fight in its battle to gain, or even maintain, market share against Intel. The firm cuts 20Y03-04 estimates below consensus, and lowers target to $5 from $7. Altera & Xilinx will publish their mid-quarter updates later this week. Expect guidance to remain unchanged. Recent channel checks suggest ALTR and XLNX remain on track to meet estimates. Channel checks suggest new applications continue to drive growth, while certain areas within telecom have recently accelerated. Continue to believe long-term PLD growth will outpace the overall semiconductor industry; analysts recently raised PLD growth to 14% estimates in 2003. Lehman upgraded Infineon to Overweight from Equal-Weight based on their belief that IFX is the least susceptible to dollar weakness within their European universe and that the stock's moderate valuation should make for limited downside in case of an industry-wide inventory build. Also, low multiples and high operational leverage make shares a key recovery play in case there is no inventory-build and the sector moves into recovery. The firm downgraded STMicroelectronics to Equal-Weight from Overweight, saying STM's earnings are the most exposed to the US$ within their European universe, and the company required significant forecast upgrades to drive the stock further given aggressive multiples. Broadcom was downgraded at Legg Mason to Hold from Buy due to valuation. With the stock now trading at 4.6x 2003 price-to-sales versus peers at 5.6x, and at 2003 P/E of 61x versus peers at 39x. The firm finds it increasingly difficult to make a case for aggressive purchase. Barron's article cited concerns over surge in wafer starts in Taiwan. The Barron's article focuses on recent development of a surge in wafer starts, which represents the measure of raw silicon wafers that head down the production line, peaking in Taiwan to a level that was previously set in Dec 2000. Fred Ramburg, a newsletter publisher on the chip industry, cites concerns over wafer starts in the first quarter being well ahead of forecasts, a possible "frontloading" of orders and lack of sustainable wafer start growth. He also suggests, "worldwide production of chips has returned to peak levels" with no real foreseeable necessity for a "massive buildup of devices". Given the lack of investor attention to the second half, he believes Taiwan Semi and United Micro guidance and forecasts will begin to be "cautionary". Mr. Ramberg also claims Intel is starting to look for second sources for every equipment it purchases, which suggests further evidence of potential concerns by co over sustainable volume and pricing. 2020insight.com Michael, I guarantee you that I never forgot the discussion we had about the SOX. Believe me your analysis was one factor that has kept me out of a great deal of losses that I might have booked by shorting stocks associated with this industry on this latest run. Like you I now believe there is a good chance of a retracement or at least some very choppy trading for the SOX for a while. There are some fundamental improvements taking place but at these levels semiconductor stocks are no longer as cheap as they were 3 months ago. I would enjoy hearing more concerning your own expectations for where the SOX might trade from here. Thanks, RtS