Needham & Co. semiconductor analyst Quinn Bolton Tuesday morning offers his swan song for the 2008 and his outlook on next year. While 2009 will be tough for semi sales, it’ll be better for semi stocks than 2008 has been. The S&P Semiconductor exchange-traded fund (XSD) is down 49% this year, ditto for the more popular Philadelphia Semiconductor Index (^SOXX), both worse than the 42% or so decline in the Nasdaq Composite Index (^IXIC).
Here’s the good news: With this quarter being the worst-ever Q4 for semis, and probably steeper-than-expected sales to come in Q1 of ‘09, they’ve had enough pain at this point that the semi stocks should be able to notch up some sequential growth starting in Q2. Also, investors expect very little at this point, and valuations are below previous trough valuations in 1998 and 2001 to 2002. That means semi stocks will probably not set new lows over the coming months, he thinks.
Bolton is modeling a 10% decline quarter-to-quarter for semis in Q1 of ‘09, which is 1 percentage point worse than he surmised back at the beginning of this month. Then, he thinks, we’ll see 1% growth in Q2 of 2009, 5.5% in Q3, and 4% growth in Q4. That’s a sharper recovery than Bolton was originally expecting: he thought semi sales growth might not come back until Q3. Bolton says that means the trough in year-over-year semi growth will happen in August of next year.
So what should you do? Buy! Accumulate shares of Broadcom (BRCM), Cogo Group (COGO) ( a Chinese maker of components for handsets, based in Shenzhen, China), Marvell Technology (MRVL), and video-chip maker Techwell (TWLL).
Tuesday, Broadcom shares were up 80 cents, or 5%, at $17.07, Cogo shares down 13 cents, or 2.7%, at $4.61, Marvell shares up 12 cents, or 2%, at $6.39, and Techwell stock up 19 cents, or 3.3%, at $6.