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

To: auriculatus who wrote (22868)	4/19/2005 11:50:54 AM
From: Donald Wennerstrom	Respond to of 95617

Here is what one brokerage/analyst concern has to say about NVLS. This is just out from CSFB. <<Margins story – an emerging endemic issue? We do believe some of the margin issues at NVLS are endemic to the industry. We believe that SCE companies have offset pricing pressures over the last 3 years through improvements in cost reduction and supply chain management. With few easy low hanging fruit left to pluck, we believe increasing price pressures and raw material commodity cost inflation could impact gross margins over the next several quarters. Note that street consensus estimates for front-end stocks still call for 2H sequential EPS growth of 32% H/H and ’06 growth of 42% y/y – versus our expectation that ’06 will decline 10-15% y/y. Estimates and valuation. We are revising our FY05 rev/EPS from $1.30bb and 76c to $1.30bb and 70c; street consensus was $1.35bb and 96c prior to the call. We are initiating 2006 estimates at $1.25bb (down ~2.7% y/y) and $0.75; street consensus is at $1.53bb and $1.32. The stock is trading at 1.7x P/B, versus prior trough of ~1.4x, well below current peer group average of ~2.5x; though at ~2.3x tangible book, stock is more inline with its peers. Margin performance could pressure the stock somewhat, but we continue to believe NVLS offers the most compelling risk/reward story in our universe and an aggressive way for investors looking for leverage to our space.>>

To: auriculatus who wrote (22868)	4/19/2005 3:35:45 PM
From: Proud_Infidel	Read Replies (3) \| Respond to of 95617

GS thinks NVLS is expensive here! Novellus' Fundamentals Likely To Deteriorate Further 04.19.05, 3:25 PM ET Goldman Sachs reiterated an "in-line" rating on Novellus (nasdaq: NVLS - news - people ), saying gross margins in the first quarter were disappointing and that the company's fundamentals are likely to deteriorate further. Novellus reported gross margins of 45.3% for the quarter, significantly below Goldman's estimate of 47.0%, and down sequentially from 49.9%. "We believe that lower margins are being driven by aggressive pricing across the semi equipment industry," Goldman said. Novellus has indicated that it sees predatory pricing behavior from competitors, and that cost-conscious customers are adding more pressure to prices. For the second quarter, Goldman expects Novellus' orders to be down about 5% sequentially due to slower investment by DRAM customers through 2005. The research firm reduced its already-below-consensus 2005 and 2006 earnings-per-share estimates on Novellus to 73 cents and 55 cents, respectively, from 75 cents and 65 cents. "We believe that Novellus remains very expensive, particularly for a stock in an industry that has grown at a 1% compound annual growth rate over the past two cycles," Goldman said.