Chips: Triple Downgrade for Micron, STMicro, and Infineon

 |  Includes: IFNNY, MU, STM
by: Eric Savitz

It’s triple-shot downgrade Monday for the chip industry Monday morning at UBS.

  • UBS analyst Uche Orji cut his rating on Micron Technology (NASDAQ:MU) to Neutral from Buy, maintaining a $5 price target on the shares, which on Friday closed at $4.85. Orji writes that pricing upside in DRAM is limited; he also says a recent hike in NAND pricing is already in the stock, and that “seasonal softness could ensue.” He also says capital raised by peers will delay further industry consolidation.
  • UBS analyst Nicolas Gaudois cut his rating on STMicro (NYSE:STM) to Sell from Neutral, keeping his price target of 4.40 Euros, or $5.99. The stock closed Friday at $6.77. He notes that the stock recently rallied 66% from the March lows without any corresponding move in estimates. “We view pure multiple expansion as risky as we have concerns over the capacity of STM to translate revenue growth into material and through-cycle margin expansion,” he writes.
  • Gaudois also cut his rating on Infineon (IFX) to Neutral from Buy; his price target comes down slightly to 2.20 Euros from 2.40.

Gaudois’ calls Monday are part of a sector downgrade of European chip stocks to Neutral. “Our positive stance until now was predicated upon semi revenues having fallen too abruptly, and lead indicators near trough levels,” he writes. “Semi stocks have since outperformed the broader markets, hence us recommending more selectivity.”
In Monday’s trading:

  • Micron is down 15 cents, or 3.1%, to $4.70
  • STMicro is down 29 cents, or 4.3%, to $6.48.
  • Infineon is down 35 cents, or 11%, to $2.82.

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