Too Soon for Euro Chip Stock Bargains - Credit Suisse

European chip and equipment stocks are under pressure after Credit Suisse semiconductor analyst Adrien Bommelaer warned in a research note today that it is too early to start shopping in the sector. While Euro chip stocks are down more this year than the overall semi sector, he advises against bargain hunting. “IC unit growth continues to decrease while the weakening dollar and macro concerns will not help in the next few months,” he writes.

Bommelaer notes that February industry data showed shipments below seasonal levels; he thinks there is concern among both distributors and manufacturers over end market demand. He cut his IC unit growth forecast for the year to 8% from 10%; he sees revenue in the industry growing 3.2% this year.

The Credit Suisse warns that the weak dollar will be a particular problem for European chipmakers, with revenues largely denominated in dollars and costs in Euros.

Bommelaer downgraded his rating on Infineox (IFX) to Neutral from Outperform; he says the weak dollar makes its 10% margin target for 2009 “seem unachievable.” He is also concerned that the company may have getting rid of its remaining stake in DRAM maker Qimonda (QI). He also trimmed estimates for both STMicro (STM) and ARM Holdings (ARMHY). Bommelaer remains positive on ASML (ASML), but cut his price target on the stock to 20 Euros from 23 Euros; he says it is “the only quality name in the European semiconductor sector.

This morning:

• ARM Holdings is down 28 cents, or 5%, to $5.37.
• STMicro is down 36 cents, or 3.1%, to $11.12.
• Infineon is down 44 cents, or 5.6%, to $7.46.
• Qimonda is up 2 cents, or 0.5%, to $4.19.
• ASML is down $1.49, or 5.7%, to $24.79.