Chip Stocks Deteriorating Fast - FBR

Conditions in the chip business continue to get worse. In fact, Friedman Billings Ramsey analyst Craig Berger this morning writes that “trends are worsening faster than we can cut estimates.” Well, not really. This morning, Berger chopped estimates and target prices for 10 stocks; he also downgraded Linear Technology (LLTC) and Maxim Integrated (MXIM) to Underperform from Market Perform, while lowering National Semiconductor to Market Perform from Outperform.

“Visibility is not stabilizing or improving but rather deteriorating further,” creating “additional downside risk or limited upside return in a stabilizing market.” He says that the global credit crunch has caused chip customers to reduce inventory in order to hoard cash. Berger notes that chip companies that recognize revenue on sell-in to the channel, rather on sell-through, are likely to see a more severe hit to revenue.

“Enterprise and corporate spending is just starting to decline as Wall Street’s troubles spill over to Main Street,” he writes. “IT spending budgets for most firms should decline next year. While chip stocks are very inexpensively priced for longer-term investors, we do not yet have visibility into the bottom for chip firms, though we suspect that such a bottom may be found in Q2 2009.”

Here’s a rundown on his new targets and estimates:

• Advanced Micro Devices (AMD): Target to $3.50, from $4.50. 2009 EPS to loss of $1.15, from loss of $1.05.
• Atmel (ATML): Target to $4.75, from $6. 2009 EPS estimate to 2 cents, from 37 cents.
• Fairchild (FCS): Target to $7, from $12. 2009 EPS to 10 cents, from 50 cents.
• International Rectifier (IRF): Target to $17, from $22. 2009 EPS to loss of 76 cents, from loss of 61 cents.
• Linear (LLTC): Target to $16, from $26. 2009 EPS to $1.30, from $1.55. 2010 to $1.20, from $1.60.
• LSI (LSI): Target to $4.50, from $5. 2009 EPS to 18 cents, from 30 cents.
• Marvell (MRVL): Target to $11, from $13. 2009 EPS remains 85 cents; 2010 to 60 cents, from 62 cents.
• Maxim (MXIM): Target to $10, from $14. 2009 EPS to 71 cents, from 83 cents. 2010 to 69 cents, from 94 cents.
• National Semi (NSM): Target to $10, from $14. 2009 EPS to 75 cents, from 82 cents. 2010 to 80 cents, from 93 cents.
• Silicon Labs (SLAB): Target to $35, from $39. 2009 EPS to $1.50, from $1.75.

Comments

[mr.verymuch:]

Nvidia??

2008 Nov 24 01:47 PM

[Davoud:]

Maxim Integrated is a sell definitely. The climate at this company is deteriorating faast due to poor management.

2008 Nov 25 12:25 PM