UBS Turns Bullish on Chips

The chip analysts at UBS turned bullish this morning, raising their ratings on a slew of stocks on the theory that the industry’s historically low utilization rates have likely troughed. UBS thinks year-over-year sales declines will likely hit bottom in the June quarter; the firm notes that “under-shipment of end consumption” should clear excess inventory over the next 1-2 quarters. While UBS sees industry revenues down 35% this year, they expect a rebound of 10% in 2010.

• U.S. chip analyst Uche Orji upgraded Texas Instruments (TXN) to Buy from Neutral, upping his price target to $20, from $15, and asserting that a sum-of-the-parts analysis points to “significant upside.”
• Orji also upgrades Intersil (ISIL) to Neutral from Sell, increasing his target to $10, from $6.75. He writes that “downside risk to fundamentals has subsided with bottoming utilization, stabilizing order trends and potential depletion of channel inventory in one to two quarter timeframe.”
• Semiconductor equipment analyst Stephen Chin upgrades MEMC Electronic Materials (WFR) to Buy from Neutral, increasing his price target to $20, from $12.50. He writes that recent checks found that a planned shutdown of its plant in Taisil, Taiwan, will be shorter than expected. He upped his Q1 EPS estimate or 9 cents, from 4 cents.
• Chin also upgraded ATMI (ATMI) to Buy from Neutral, boosting his target to $20, from $13. He says the company’s March wafer starts could increase over February given more copper-related materials sales to its largest foundry customer, Taiwan Semiconductor (TSM). For 2009, he now sees a loss of 92 cents a share, versus a previous estimated loss of $1.04. For 2010, he sees profits of 80 cents, up from 40 cents.
• European chip analyst Nicholas Gaudois upped his rating on CSR ((LSE:CSR)) to Buy from Neutral, upping his target to 260 pence from 200. He sees the potential for material upside from the company’s proposed acquisition of SiRF (SIRF).
• Gaudois also upped his rating on STMicroelectronics (STM) to Neutral from Sell, boosting his target to 4.40 Euros from 3.70. He says company specific risks remains, but that the downside appears limited with the stock trading at 0.8x enterprise value/trough-of-cycle ‘09 revenues.
• Asian chip analyst Jonah Cheng upped his ratings on United Microelectronics (UMC), Advanced Semiconductor, also known as ASE (2311.TW) and Siliconware Precision (SPIL) to Buy from Neutral.

Comments

[Jake Berzon:]

Sounds overly optimistic to call a bottom for chips in June. There are issues with large current inventory of consumer products and the stuffed channel. Consumer demand would have to bottom out at least a quarter ahead of the bottom in chips and I just don't see that right now.

Feb 13 05:24 PM

[Stone Fox C...:]

While I agree with the other 2 comments that analysts aren't to be followed blindly, the fact that these analysts are going against the trend is unusual. Usually when you get seperated from your money is b/c they upgrade at the high right before a stock swoons or they downgrade at the low right before the big rally. In this case, these analysts have actually seen some turns in the fundamentals of these stocks. Worth watching but I don't see alot to like in this sector.

Feb 14 11:49 AM