Northland starts coverage on chip equipment stocks

Applied Materials (AMAT +0.1%), ASML (ASML -0.6%), Lam Research (LRCX +0.4%), and Brooks Automation (BRKS +2.1%) have been started at Outperform, and KLA-Tencor (KLAC +0.9%) and Mattson (MTSN -0.9%) have been started at Market Perform.

The firm argues new leadership, an expected chip equipment up cycle, and "industry timing for new technology inflection points" will benefit Applied.

It views Lam as having "the best share gain potential" among large-cap equipment makers (its 20nm process strength is cited), and sees the company getting a lift from rising memory capex.

Northland thinks ASML can outgrow the wafer fab equipment market (expected by Gartner to grow 17% next year), and expects the Cymer acquisition to lift margins.

It offers a more subdued take on KLA, asserting the company's "historical growth premium versus the industry could be peaking," even as it benefits from investments in next-gen manufacturing processes. Northland also believes Applied is set to "become more competitive" relative to KLA.

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