"In the memory chip markets, unit sales are rising, while prices
are firming after a late collapse of DRAM prices in 1997, Joseph said.
He expects DRAM prices to firm as the year goes on."
"On the positive side, Joseph noted that major Korean chipmakers,
such as Samsung, are now slashing their capital spending due to their
inability to borrow, and as a result, they won't be able to add
capacity that might have put further pressure on commodity chipprices.
Joseph's current stock picks include Micron Technology, Intel(1)
and NeoMagic(1)."
HERE THE FULL REPORT:http://biz.yahoo.com/bw/980128/nationsban_2.html
Tomorrow Never Dies for Semiconductor Stocks, According to NationsBanc Montgomery Securities Analysts
BusinessWire, Wednesday, January 28, 1998 at 20:20
SAN FRANCISCO--(BUSINESS WIRE)--Jan. 28, 1998--
Semiconductor Stocks Will Outperform S&P 500 in 1998, Analysts
Predict
Continued strong demand from the personal computer industry,
increased sales to the communications sector and a firming of memory
chip prices should result in a solid year for most semiconductor
companies and stocks, according to a team of semiconductor industry
analysts for NationsBanc Montgomery Securities.
"We believe semiconductor stocks will outperform the S&P 500 in
1998," predicted Jonathan Joseph, a senior research analyst who covers
such companies as Intel, Texas Instruments, Micron Technologies and
NeoMagic.
Joseph's comments came at NationsBanc Montgomery Securities' 15th
Annual Technology Week investment conference, which is running January
27 through January 30. The conference has attracted more than 1,900
attendees to hear presentations by 147 public companies and 35 private
companies.
During the conference, NationsBanc Montgomery Securities analysts
are conducting a series of workshops that provide attendees with
up-to-the-minute analyses of a wide variety of industry segments.
Joining Joseph in the semiconductor workshop were analysts Clark
Westmont and Douglas Lee.
Joseph based his stock price prediction on the correlation
between expected strong demand for chips and an expected reduction in
semiconductor capital spending. Historically, when semiconductor
capital spending falls, but demand for semiconductors rises,
semiconductor stock prices rise as well, Joseph said.
In 1998, capital spending is expected to drop 5%, while demand is
expected to increase by 10%, suggesting a good year for semiconductor
stocks.
Joseph forecast "sustained, double-digit growth" of demand for
chips used in personal computers, including microprocessors, digital
signal processors (DSPs), microcontrollers and microperipherals.
He also expects increasing demand for semiconductors used in
digital wireless telephones and cellular networks, as communications
networking software is increasingly embedded directly on
semiconductors.
In the memory chip markets, unit sales are rising, while prices
are firming after a late collapse of DRAM prices in 1997, Joseph said.
He expects DRAM prices to firm as the year goes on.
Joseph also addressed investor concerns about the effect of Asian
economic problems on the semiconductor industry. Overall, he believes
that semiconductor stocks have already absorbed the bad news from
Asia. He said that concerns about slowing demand from Asia are real,
and that the Asian "flu" could spread to China and Japan.
On the positive side, Joseph noted that major Korean chipmakers,
such as Samsung, are now slashing their capital spending due to their
inability to borrow, and as a result, they won't be able to add
capacity that might have put further pressure on commodity chip
prices.
Joseph's current stock picks include Micron Technology, Intel(1)
and NeoMagic(1).
Analog Chips Enable Digital Revolution
Analyst Douglas Lee, who covers analog and discrete devices,
noted that while digital semiconductors, such as microprocessors, get
all the attention, it is analog chips, such as signal converters and
power management devices, that do the less glamorous work behind the
digital revolution.
For instance, he pointed out that a "digital" cellular phone is
actually comprised of 60% analog components, such as power amplifiers
and filters.
The market for analog devices is approximately $20 billion and is
growing at a compound annual growth rate of 17% annually, he
estimated. Analog devices "have the most stable growth profile of all
the semiconductor sectors," Lee said.
Lee asserted that stocks of analog device companies are "an
essential play" for semiconductor investors due to the sector's
favorable attributes: high barriers to entry; relatively low capital
requirements; diversification among customers, markets and products;
long product life cycles; and many high-performance product niches.
With many investors aware of these factors, stocks of analog
device companies have already seen strong price appreciation. Among
those still sporting attractive valuations are Semtech, a leader in
analog microprocessor power management.
Lee also favors Aavid Thermal Technologies(1), a major provider
of thermal management solutions who he believes will be a derivative
beneficiary of increasing power consumption trends.
Makers of Communications Components Have a License to Kill
Analyst Clark Westmont highlighted opportunities in the
communications component industry for investors. The industry, which
supplies semiconductors used in wireless communications as well as
local-area and wide-area networks, enjoys high barriers to entry but
is not a capital-intensive industry.
Furthermore, once customers have designed their products, it is
costly for them to switch suppliers, giving the industry pricing
leverage and providing greater certainty to revenues.
The $8.3 billion wireless chip industry is forecast to grow at a
compound annual rate of 17% through 2001, while the market for
networking chips is expected to grow 11% per year during the same time
period, Westmont said.
Westmont's stock selections include PMC-Sierra(1), Level One
Communications(1), Applied Micro Circuits(1) and Analog Devices(1).
NationsBanc Montgomery Securities LLC (NMS), a subsidiary of
NationsBank Corporation, is a full-service investment bank and
brokerage firm with approximately $800 million of regulatory capital.
The company provides research, trading and issuance in the equity
and fixed-income markets (high yield, emerging markets, high grade and
mortgage-backed markets). Other services include M&A advisory,
financial buyer coverage, loan syndications, global investment
banking, real estate finance, mortgage finance, money markets and the
primary dealer.
Through NationsBank, NMS clients can also access products and
services that include senior bank debt, bridge financing, real estate
banking, treasury management, trade finance and risk management
(derivatives products and foreign exchange).
NMS is a registered broker-dealer with the Securities and
Exchange Commission and is a member of the National Association of
Securities Dealers and the New York Stock Exchange. NMS employs more
than 2,200 investment professionals.
(1) NationsBanc Montgomery Securities LLC currently maintains a
market in this security. NationsBanc Montgomery Securities LLC was
manager or co-manager of a public offering and/or has performed
investment banking or other services for this company in the last
three years.
CONTACT: NationsBanc Montgomery Securities
Jennifer A. Smith, 415/913-5968
jasmith@montgomery.com |
