Weaker-than-expected guidance from Broadcom, Altera, RF Micro, and STMicroelectronics has fueled a general selloff in chip stocks (SOXX -3.5%). Companies with strong mobile and/or telecom infrastructure exposure are seeing an outsized share of the damage.
The numbers call into question the strength of year-end demand from consumer electronics, enterprise hardware, and telecom equipment firms, and make a recent Wells Fargo downgrade of the sector look smart.
Needham's Rajvindra Gill, who upgraded Synaptics (SYNA +2.6%) to Buy back in March, says the company's touchscreen controllers are in at least two of Amazon's three new Kindle Fires, and have displaced chips from Atmel (ATML +1.8%) and Cypress (CY +1.7%) in the process.
Synaptics has been taking touchscreen IC share this year, thanks in large part to design wins for Samsung's Galaxy S4 and Note 3, Sony's Xperia Z, and other high-volume Android devices. The company pre-announced above-consensus Sep. quarter sales last week.
Alcatel-Lucent (ALU +1.4%) has been upgraded to Overweight by Barclays, and Ericsson (ERIC -3.3%) cut to Underweight.
AMD (AMD +1.4%) has been upgraded to Outperform by Wedbush.
Stratasys (SSYS +2.2%) has been upgraded to Buy by Dougherty & Co.
Glu Mobile (GLUU +1.3%) has been upgraded to Buy by B. Riley.
Mattson (MTSN +4.9%) has been upgraded to Buy by B. Riley.
Expedia (EXPE -6.9%) has been cut to Hold by Deutsche.
Atmel (ATML -1.9%) has been cut to Sector Perform by Pac Crest.
As part of a coverage launch for chip equipment stocks, KLA-Tencor (KLAC +0.6%) and Lam Research (LRCX -0.4%) have been started at Overweight by JPMorgan, and Applied Materials (AMAT -1.2%) has been started at Neutral.
Needham's Rajvindra Gill has cut Cypress (CY -15.6%) to Hold in response to its Q3/Q4 warning. However, he also argues the warning shouldn't be seen as a "direct negative read" for mobile IC rivals/peers Synaptics (SYNA +1.4%), Atmel (ATML -2.5%), MagnaChip (MX +0.1%), and Silicon Image (SIMG -0.9%).
Gill thinks "end of life actions" for certain Nokia products are hurting Cypress, as are year-end inventory cuts at Samsung, Japanese exposure, and customer push-outs (believed to be from Sony and/or Chinese OEMs). He suspects customer ramp uncertainty and "perceived share loss" to Synaptics will limit 2014 earnings and offset Cypress' operating leverage.
Though Atmel continues to trade lower, Synaptics has turned positive after dropping in premarket trading.
Cypress (CY) expects Q3 revenue of $184M-$187M and EPS of $0.10-$0.12, below a consensus of $204.7M and $0.17. (PR)
The chipmaker primarily blames weak Asian mobile orders, thanks to "a customer push out of certain new handset programs to Q1, as well as order reductions at various end customers in China to balance inventory levels." To a lesser extent, PC weakness is also to blame.
In addition, Cypress thinks Q4 revenue could fall 9%-11% from Q3 levels; that implies a range of $164M-$170M, well below a $207.3M consensus. Weaker-than-expected TrueTouch touchscreen controller sales in the mobile phone market is blamed, along with inventory corrections and lower memory chip demand from telecom customers.
Synaptics (SYNA) -1.2% in sympathy. The company has been growing much faster than Cypress, and could be taking touchscreen controller share from its rival. Atmel (ATML) -0.5%.
Morgan Stanley is overhauling its chip stock coverage. Maxim (MXIM -0.4%) has been cut to Equal Weight a day after announcing the Volterra acquisition, and largely getting good reviews for it. Meanwhile, Linear (LLTC +0.6%) and Xilinx (XLNX +1.3%) have been upgraded to Overweight.
In addition, MS has started ON Semi (ONNN +0.4%) and Freescale at Underweight, Atmel (ATML +1.7%) and Fairchild (FCS +0.9%) at Overweight, and Microchip (MCHP +0.5%) at Equal Weight.
RBC has started another analog chipmaker, Semtech (SMTC +1.6%), at Outperform ahead of its Aug. 21 FQ2 report.
Though Atmel (ATML) beat Q2 estimates, the chipmaker guided on its Q2 CC for Q3 revenue of $348M-$365M, below a $372.3M consensus.
Atmel expects Q/Q growth in its touch sensor/controller business, thanks to design wins with tier-1 OEMs. However, its Sensor Hub microcontroller sales are expected to slump due to the slowing ramp of a top customer's flagship product.
Both Synaptics and Atmel are known suppliers for Samsung's Galaxy S4, but Synaptics appears to have more dollar content, and the company's Hover tech is believed to enable the S4's touch-free gestures.
Synaptics is still up 32% YTD, thanks to soaring touch controller sales to Samsung and other major smartphone OEMs.
Atmel reports on Wednesday, and Synaptics on Thursday.
A roundup of tech ratings changes: 1) BNP Paribas has started Baidu (BIDU +1.6%) at Buy. 2) Longbow has upgraded Seagate (STX +4.1%) and Western Digital (WDC +2.9%) to Buy. 3) Pac Crest has started Synchronoss (SNCR +2.9%) at Outperform. 4) Lazard has upgraded Trimble (TRMB +2.5%) to Buy. 5) BMO and RBC have downgraded Rogers (RCI -1.9%) to Market Perform/Sector Perform, and BMO has also downgraded Telus (TU -2.4%) to Market Perform. However, Stifel has upgraded Telus to Buy. (yesterday). 6) HSBC has upgraded Sohu (SOHU +3.8%) to Neutral. 7) China Mobile (CHL +1.7%) has been upgraded to Neutral by BofA/Merrill. 8) Atmel (ATML +1.4%) has been upgraded to Buy by Lazard. 9) Flir Systems (FLIR +2.1%) has been upgraded to Overweight by Stephens.
Synaptics (SYNA) +14.3% AH after raising its FQ4 (June quarter) revenue guidance range to $227M-$230M from a prior $190M-$205M, which itself was well above a consensus of $158.2M; the current consensus is $198.2M. Gross margin is pegged at ~50%, about even with FQ3's 49.6% Unsurprisingly, Synaptics attributes the guidance, which translates into 40% Q/Q and 66% Y/Y growth at the mid-point, to strong mobile product (i.e. touch controller) demand stemming from many design wins. The guidance comes in spite of order cut reports for the Galaxy S4, for which Synaptics is a key supplier. ATML +1.3%. CY +0.9%. UNXL +1.2%.
Atmel Corporation ( $ATML ) to See Demand Increase for Microcontrollers and New Touch Sensor XSense- http://su.pr/3ecmzU
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Ashraf Eassa+ FollowFollowing- Unfollow|Send Message3 May 2013
Sold $ATML @ $6.40 for +0.18/share from yesterday's buy.
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Ashraf Eassa+ FollowFollowing- Unfollow|Send Message3 May 2013
: When my capital is committed, I will sometimes utilize margin for short term trades with tight stops.
Sam Liu+ FollowFollowing- Unfollow|Send Message3 May 2013
ATML vs. ETF Alternatives
Atmel Corp designs and manufactures microcontrollers, capacitive touch solutions, advanced logic, mixed-signal, nonvolatile memory, radio frequency (RF) components and application specific integrated circuits.