Downbeat chip stocks whacked ahead of Q3 reports
23/10/2018 12:32
** Semiconductor stocks continue to underperform the broader
market (Philadelphia semiconductor index .SOX drops 9.7 pct
MTD vs S&P 500 down 5.4 pct), which analysts say could be due to
a cyclical correction
** Most chip stocks tumble premarket with Micron MU.O and
AMD AMD.O down 3.4 pct and 1.7 pct, respectively; stocks are
among the most actively traded
** While Jefferies likes the setup going into Q3 with the
P/E ratio for SOX near 2015 lows, Barclays believes trade war
could be the real issue for the selloff
** Both brokerages are positive on the fundamentals for the
group at large although Barclays points that earnings may only
provide a temporary relief rally and believes it will be hard
for the sector to grow until trade tensions ease
** Barclays upgrades NXP Semiconductors NXPI.O to
"overweight" given the sharp pull back (10.6 pct MTD) and AMD to
"equal weight" ahead of its 7 nanometer server launch
** Jefferies believes AMD AMD.O could surprise positively
(benefits from Intel INTC.O capacity constraints)and says
Broadcom AVGO.O and NXPI have particularly attractive
risk/reward ratios
** Susquehanna downgrades chip gear makers Lam Research
LRCX.O , ASML Holding ASML.AS ASML.O and Applied Material
AMAT.O to "neutral" from "positive" on an increasingly
challenging enterprise/cloud demand environment
** AMD is due to report Q3 on Wednesday while INTC is
expected to issue Q3 earnings Thursday after markets
(Reporting by Medha Singh in Bengaluru)
((medha.singh@thomsonreuters.com))