European semiconductors: "Too early to be bullish" - JP Morgan
14/04/2020 07:32
** JP Morgan says it is too early to be bullish on European
semiconductors, as the economic shock from the COVID-19 pandemic
will mean more substantial earnings cuts than discounted
** The brokerage says many companies will not have seen any
substantial sales slowdown in Q1 as the supply chain is unlikely
to have reacted that quickly to the changing environment
** Both guidance and visibility for Q2 and Q3 will
potentially be much lower than current expectations as reality
sets in
** JPM says inventory will significantly increase in Q2 and
Q3, which will result in utilization decreasing at semiconductor
companies with the resultant negative impact on margin
** The broker says it believes autos and industrial markets
are most at risk, while semiconductor equipment companies will
likely be among the last to see an impact of a downturn
** The broker downgrades STMicroelectronics STM.MI and
Sensirion SENSI.S to "neutral" from "overweight", considering
the next two quarters will be very challenging given their
auto/industrial exposure
** On a relative basis it says it keeps an "overweight"
rating only on ASML Holding ASML.AS , adding it is looking for
either signs of stability or reduced expectations to become more
constructive
** It maintains its "neutral" rating on ASM International
ASMI.AS , Dialog Semiconductor DLGS.DE , Melexis MLXS.BR ,
VAT Group VACN.S
((marta.frackowiak@thomsonreuter.com))