- Berenberg's Tammy Qiu declares Applied Materials (AMAT - Buy reiterated) and Lam Research (LRCX - launched at Buy) to be two of her favorite chip equipment plays ahead of an expected 2015/2016 slowdown in semi capex.
- Like David Einhorn and others, Qiu expects Lam to gain chip equipment share thanks to strong exposure to the FinFET (3D transistor) etching and 3D NAND flash deposition/etching markets.
- Applied is expected to benefit from both FinFET/3D NAND exposure and Tokyo Electron (OTCPK:TOELF) merger synergies. Qiu: "We believe TEL can improve its margin following the merger with AMAT, from single-digit to above 20%, by exiting non-profitable business, optimizing operations and platform alignment with AMAT."
- She's less enthusiastic about KLA-Tencor (NASDAQ:KLAC) and ASML, launching the former at Hold and reiterating a Hold on the latter. Though liking KLA's process control share (helps with regards to FinFET exposure), Qiu considers shares fairly valued at 21x estimated FY15 (ends June '15) EPS.
- ASML, meanwhile, is expected to see a relatively slow EUV sales ramp. Qiu expects ASML to ship only 40 EUV tools in 2019, below management's guidance for 50-60. In addition, sales of ArFi lithography tools are expected to "decline over time due to re-use and efficiency improvements."
- Altogether, Qiu forecasts semi capex will grow just 2% in 2015 and decline 7% in 2016, after growing 12% in 2014. Memory capex is expected to fare better than foundry/logic capex.