An increase in negative news came from two technology sub-sectors. In the data storage device space, a securities firm lowered earnings estimates last week for hard drive makers. FBN Securities forecast that price declines for disk drives sold by Seagate (STX) and Western Digital (WDC) would accelerate. Seagate fell 6.27% to $25.72 on April 5, while Western Digital fell 3.73% to $39.74. In the semiconductor space, SanDisk (SNDK) added to fears of a slowdown technology when it reduced forecasts for the first quarter. SanDisk experienced weaker demand and higher price erosion, leading to a lowered forecast. Two weeks ago, Micron (MU) noted weaker NAND pricing.
What do these negative forecasts mean for companies in the semiconductor sector unaffected by the revisions?
Marvell Technology Group Ltd. (MRVL) - Buy
Marvell Technology, which makes integrated chips for hard drive makers, saw short volume increase to 4.74M shares as of March 15, 2012. This is a 48.3% increase from February 29. Yet, Marvell forecast an increase for hard disk memory by almost 20% for the year. Marvell traded close to $17 earlier this year, and closed recently at $15.14. In its last earnings report, the company reported a 64% drop in profits. Marvell is a stock to "buy" for investors with the stomach to ride the volatility of storage space demand.
Cree Inc. (CREE) - Avoid
Cree develops and manufactures light emitting diodes. Shares closed at $29.61, up 34.35% year-to-date. The company is scheduled to report earnings on April 17. The results are not expected to be positive. In its Q1/2012 earnings report, Cree detailed the time needed to integrate the operations of Ruud Lighting. Bearishness increased in shares of Cree last month. Short volume increased to 16.68M shares as of March 15, up 9.5% from 15.23M shares.
Universal Display Corp. (PANL) - Avoid
Universal Display shares are down 2.26% in 2012, and closed at $35.86. Shares rallied above $45 in February of this year as investors traded on positive speculation. The company was rumored to be close to inking long-term deals with companies like LG Electronics (LPL). Still, the AMOLED industry is also expected to grow nearly 300% for 2012 and nearly 400% from 2011 levels. This is positive for Universal Display, but investors should recognize that sentiment for the sector is shifting to that of caution. This will place a negative pressure on share price in the short term.
OmniVision Technologies Inc. (OVTI) - Buy
Recommended as a contrarian buy on March 7, OmniVision continued its assent, closing recently at $20.12. OmniVision is benefiting from the recent release of Apple's (AAPL) iPad 3. When the iPad was released, rumors were confirmed that OmniVision's OV5650 image sensor was being used in the tablet. Very little insider selling is another positive for OmniVision. The last recorded insider sale was July 5, 2011, when CEO Hong Shaw sold 19,195 shares totaling $663,385.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
