Time to Take Profits in Chips

As I’ve been pointing out over the last few days, semiconductor stocks have been on a tear of late; over the last seven trading sessions, the SOX is up 20%, which is even better than the 17% rally on the S&P 500. But the time may have arrived to take profits.

Certainly, that’s what Morgan Stanley’s Mark Lipacis is advising. He told clients this morning to sell into the strength. In particular, he notes that Advanced Micro Devices (AMD), Nvidia (NVDA) and RF Micro Devices (RFMD) will lost money in 2010, and that Broadcom (BRCM) and Marvell (MRVL) enter FY 2010 with rich multiples. He advises selling all of them.

Lipacis asserts that the China rural stimulus program, in which the government is offering 13% rebates on selected goods, “is driving a good part” of the recently more positive data points from the supply chain. But he thinks there is risk that the China distribution channel is building inventories in excess of the demand for the China rebate program.

Indeed, Lipacis contends that supply chain inventories are “elevated” based on a forward inventory days perspective, “which translates into order and EPS risk for semiconductors.”

The SOX Thursday is down 2.99, or 1.3%, to 225.53.

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Comments

[Mr tech:]

Now is the time to BUY amd, not sell it. In fact, Amd (which I own) is up another %50 since this article. Perhaps because every article says this the sentiment is just plain wrong on this stock. I'm looking for 10-15$ this year.

Mar 27 01:52 AM