Wed, Mar. 25, 12:03 PM
- Chip stocks are particularly hard-hit (SOXX -3.6%) on a rough day for tech. The Nasdaq is down 1.3%, and the S&P 0.7%. Going into today, good earnings reports and ongoing M&A activity had led the Philadelphia Semi Index to rise 10% from its Jan. 30 close; the index remains up nearly 2x from its fall 2012 lows.
- AMD (AMD -7.2%) is a major decliner following a UBS downgrade. AMD rival/GPU giant Nvidia (NVDA -5.2%) and memory giant Micron (MU -3.7%) are also selling off, as are merger partners NXP (NXPI -3.8%) and Freescale (FSL -3.4%), RF chipmakers Avago (AVGO -5.2%), Skyworks (SWKS -5.3%), and Qorvo (QRVO -7.1%), LED/RF chipmaker Cree (CREE -4.1%), and high-flying video processor developer Ambarella (AMBA -4.3%).
- Other decliners include telecom chipmakers/ARM server CPU vendors Cavium (CAVM -4.8%) and AppliedMicro (AMCC -4.4%), microcontroller vendors Atmel (ATML -3.5%), Cypress (CY -5.5%), and STMicroelectronics (STM -3.5%), voice processor developer Audience (ADNC -3.7%), analog/mixed-signal chipmakers Linear (LLTC -3.7%), Maxim (MXIM -3%), and Intersil (ISIL -3.5%), FPGA maker Lattice (LSCC -3.9%), and mixed-signal/wireless charging IC developer IDT (IDTI -5.4%).
- Chip equipment, IP, and foundry providers are also underperforming. Big decliners include ARM (ARMH -4.4%), KLA-Tencor (KLAC -4.2%), Lam Research (LRCX -5.4%), ASML (ASML -4.1%), TowerJazz (TSEM -4.3%), Mattson (MTSN -4.5%), Ultratech (UTEK -4.7%), and Tessera (TSRA -6.1%). ASML has been downgraded to Hold by Banco Santander.
- TSMC (TSM -4.6%) is among the decliners in spite of a Digitimes report stating the foundry giant's sales are expected to rise 0%-5% Q/Q in Q2 - consensus is for a 2% drop - with strong Apple A8 CPU orders offsetting soft Qualcomm Snapdragon 810 orders.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Fri, Mar. 20, 12:55 PM
- Believing the company will offer soft FQ4 (June quarter) guidance to go with its April FQ3 report, Needham's Edwin Mok has cut his Lam Research (LRCX -0.2%) target by $2 to $93, while reiterating a Buy. Longer-term, he still expects Lam to perform well thanks to a 2H15 sales pickup driven by the company's strong exposure to FinFET (3D transistor) and 3D NAND process investments.
- Meanwhile, Mok has downgraded Ultra Clean (UCTT -8.6%) to Hold, citing expectations "for a weaker 2Q15 in the SemiCap space and the lack of growth driver for the year." He sees DRAM push-outs hurting Q2 sales, and thinks efforts to win new business will take time to bear fruit.
- Lam is missing out on a market rally, while Ultra Clean is off sharply. Lam sold off on Wednesday after JPMorgan reported Samsung is slowing the pace of its DRAM investments. Mok downgraded chip manufacturing materials supplier Cabot Microelectronics on Monday.
Wed, Mar. 18, 11:16 AM
- JPMorgan reports Samsung is slowing down the pace of its DRAM capacity ramp. The firm reiterates an Overweight rating and $40 target on Micron (MU +0.8%), whose shares have been hit more than once by Samsung spending fears.
- While Micron edges higher, chip equipment maker Lam Research (LRCX -4.3%), which has considerable DRAM exposure, is selling off. Mattson (MTSN -11.8%), Aixtron (AIXG -1.9%), and Axcelis (ACLS -1.1%), other equipment makers that have DRAM exposure, are also lower. Mattson dived around 11AM after initially posting moderate losses.
- Lam, a David Einhorn favorite, offered upbeat commentary about 2015 DRAM capex on its FQ2 CC (transcript), and noted 30% industry bit growth is expected this year.
- Also: 1) Drexel Hamilton has made upbeat comments about DRAM demand after talking with an unnamed Asian memory maker; the firm expects mobile DRAM demand to restore a supply/demand balance later this year. 2) Jefferies (Buy) has cut its Micron target by $5 to $40, predicting Q1 DRAM pricing weakness will continue into Q2 due soft PC demand, before smartphone demand and "corrective actions on the supply side" lead prices to stabilize.
- Yesterday: Micron drops on RBC target cut
Nov. 24, 2014, 12:26 PM
- Citing stronger-than-expected DRAM demand, a $1B buyback, the Inotera JV's Q3 results, and a weak yen, Goldman's James Covello has hiked his Micron (MU +1.8%) target by $3 to $32, albeit while reiterating a Neutral.
- SanDisk (SNDK +1.9%), which receives a favorable mention in Covello's note, is also outperforming. As is chip equipment maker Lam Research (LRCX +2.8%), which has considerable DRAM/NAND exposure and has seen its target hiked by $6 to $91. The Nasdaq is up 0.7%.
- Covello: "We are now modeling about 1% DRAM undersupply in 2015 (from balanced prior) ... Our new content estimates for phones, tablets and servers are now all modestly above third party forecasts to better reflect this."
- Nonetheless, Covello remains more partial to SanDisk, due to a belief the DRAM industry's EBIT margins (among the highest in the chip industry) are unsustainable. "We expect excess returns to continue to attract supply (creating upside risk to our 2015 base case supply estimate of 25% yoy) ... DRAM capex is up about 40% yoy in 2014E and tracking higher in 2015E." Bulls are counting on industry consolidation to keep a lid on supply growth.
Oct. 22, 2014, 5:04 PM
- Though it beat FQ1 EPS estimates and posted in-line revenue, Lam Research (NASDAQ:LRCX) is guiding for FQ2 revenue of $1.23B (+/- $50M) and EPS of $1.12 (+/- $0.07), unfavorable to a consensus of $1.25B and $1.16. Shipments are expected to total $1.24B (+/- $50M).
- Gross margin rose 140 bps Y/Y in FQ1 to 43.9%, and op. margin 420 bps to 14.6%. A GM of 45.5% (+/- 1%) is expected in seasonally strong FQ2.
- Shipment growth by geography: U.S. (inc. Intel) +25%, Korea (inc. Samsung/SK Hynix) +16%, Taiwan (inc. TSMC) +21%, Japan +11%, China +8%, SE Asia +11%, Europe +8%.
- FQ1 results, PR
Oct. 10, 2014, 9:59 AM
- Microchip's (MCHP -12.5%) calendar Q3 warning, which was accompanied by a declaration that it believes "another industry correction has begun and that this correction will be seen more broadly across the industry in the near future," is taking a heavy toll on chip stocks (SOXX -5.5%).
- Intel (INTC -4.2%) and many other chipmakers have joined the several firms that sold off AH yesterday in going in the same direction as Microchip: MU -5.8%. FSL -8.5%. BRCM -3.6%. SWKS -7.5%. RFMD -6.2%. XLNX -4.9%. MXIM -5%. AMBA -5.5%. IDTI -6.7%. CAVM -7.4%. AVGO -10.2%. SMTC -4.3%. SYNA -4.1%. POWI -6.9%.
- Chip equipment makers are also getting hit: AMAT -3.5%. KLAC -3.3%. LRCX -2.3%. UTEK -2.5%. KLIC -2%.
- As Microchip noted in yesterday's warning, the company's very diversified customer base, together with its recognition of distributor revenue on a customer sell-through basis rather than a distributor sell-in basis, often allow it to see industry changes before peers.
- The microcontroller vendor added its warning was driven by a September decline in sales to Chinese clients, and observed it has typically "returned to sequential revenue growth after two quarters" during past downturns.
- Chip stocks have had a good run over the last 12 months, aided by healthy mobile demand and the industry's consolidation wave.
Jul. 31, 2014, 10:55 AM
- Like peer KLA-Tencor, Lam Research (LRCX +4.2%) provided a soft Sep. quarter outlook: It expects FQ1 revenue of $1.11B (+/- $50M) and EPS of $0.92 (+/- $0.07) vs. a consensus. of $1.15B and $1.00.
- But Lam also used its CC (transcript) to reiterate guidance for $32B in 2014 industry wafer fab equipment (WFE) spend, and for the company to outpace industry growth.
- It added foundry spend (30% of FQ4 shipments) is expected to strengthen thanks to FinFET (3D transistor) process investments, and that DRAM spend (39% of shipments) is benefiting from tight supplies. Lam also sees a healthy supply/demand balance for NAND flash, though it's a little cautious about near-term 3D NAND flash investments.
- Lam sees the share of WFE spending addressed by its products growing to 1/3 of WFE spend next year thanks to "technology inflections" (FinFET, 3D NAND, etc), and thinks its "technology inflections applications market share is in excess of 50% across [Lam's] portfolio of deposition edge and clean products."
- David Einhorn must be pleased with today's move.
- FQ4 results, PR
Apr. 29, 2014, 5:34 PM
- Lam Research (LRCX) is initiating an $0.18/share quarterly dividend (1.25% yield). The first dividend will be paid on July 2 to holders on record as of June 11.
- Lam is also launching an $850M buyback that replaces a prior $250M authorization (had $49M remaining). The new buyback is good for repurchasing 9% of shares at current levels.
- The capital return efforts come with Lam trading close to its 52-week high of $58.94. Shares soared last week after the chip equipment maker beat FQ3 estimates and offered strong FQ4 guidance.
Apr. 24, 2014, 1:42 PM
- Lam Research (LRCX +11%) beat FQ3 estimates and guided on its CC (transcript) for FQ4 revenue of $1.19B-$1.29B and EPS of $1.14-$1.28, above a consensus of $1.16B and $1.09. Ultratech (UTEK +3.6%) missed Q1 estimates, but has reiterated guidance for 25%-30% 2014 revenue growth (above a 23.5% consensus).
- Just as importantly for the industry, Lam has forecast the global wafer fab equipment market will be worth $32B in 2014 - $1B more than what Gartner previously forecast.
- Lam also mentioned it has "seen some strengthening" in DRAM equipment orders - clients have been conservative with their capex following industry consolidation - and a "sustained commitment" among logic/foundry clients (Intel and TSMC?) to advanced processes (20nm, 3D transistors, etc.). However, there have been "some slight delays" in 3D NAND flash investments.
- Chip equipment peers are also up: AMAT +1.4%. KLAC +1.5%. ASML +2.1%. ACLS +1.6%. CAMT +5.3%. RTEC +1.5%. PLAB +3.4%. One notable exception is Teradyne (TER -4.1%), which provided light Q2 EPS guidance - $0.36-$0.43 vs. a consensus of $0.49 - to go with a Q1 beat. Revenue guidance is in-line.
- The group sold off last week after ASML offered soft guidance and a cautious 2H outlook. KLA reports after the bell.
Apr. 24, 2014, 12:46 PM
Apr. 23, 2014, 5:38 PM
Apr. 16, 2014, 11:40 AM
- ASML (ASML -5.5%) has lowered its 1H14 sales outlook. Moreover, the lithography equipment kingpin says logic IC customers are "encountering timing uncertainties in next-generation device designs" for 2H, and that NAND flash memory makers are "continuing their evaluation of [3D] NAND and future-node planar technologies, resulting in uncertainties for system demand."
- ASML's remarks about logic customers might partly be a reference to Intel, which has reportedly delayed the launch of its 14nm Broadwell CPUs. NAND vendors have been keeping a lid on capex for some time; recent price pressure might encourage them to do so.
- Chip equipment peers Applied Materials (AMAT -2%), KLA-Tencor (KLAC -2.5%), Lam Research (LRCX -2.5%), Axcelis (ACLS -2.6%), Camtek (CAMT -5.8%), and Ultratech (UTEK -0.9%) are off in sympathy. Compared with many other tech companies, the group has held up well during the March/April selloff.
- One silver lining: ASML says multiple customers are qualifying 10nm EUV lithography equipment, and that it expects to recognize revenue on 8 EUV systems in 2014. Investments in both EUV and 450mm wafers have been delayed.
- Gartner has forecast chip wafer fab equipment spend will grow 14.9% in 2014 to $31B, after falling 9.1% in 2013.
Feb. 3, 2014, 9:45 AM
- Zynga (ZNGA -2%) has been cut to Underperform by BofA/Merrill. Shares flew higher last week after Zynga announced a Q4 beat, major layoffs, and the acquisition of mobile game developer NaturalMotion.
- Palo Alto Networks (PANW +1.9%) has been upgraded to Outperform by Wells Fargo.
- Chip equipment makers Applied Materials (AMAT -0.5%), KLA-Tencor (KLAC -1.3%), and Lam Research (LRCX -1.7%) have been cut to Sector Perform by RBC. Lam posted an FQ2 beat last week; KLA delivered an FQ2 EPS beat the week before.
- Nanometrics (NANO -5%) has been cut to Sector Perform by RBC.
- Sungy Mobile (GOMO +3.8%) has been started at Outperform by Oppenheimer.
Jan. 24, 2014, 2:08 PM
- Chip equipment stocks aren't getting spared from a general market selloff after Samsung (SSNLF - the world's #2 chipmaker) guided for its 2014 chip capex to be flat Y/Y. AMAT -1.6%. LRCX -3.7%. ASML -0.7%. UTEK -2.2%. RTEC -3.2%. MTSN -5.1%.
- Industry analyst Robert Marie observes this is the first time since 2009 that Samsung hasn't upped its chip capex budget. With Intel and TSMC (the industry's two other big clients) also guiding for capex to be flat (if not down) this year, Marie is cautious about 2014 growth, even though others have forecast sales will rebound sharply this year following a rough 2013.
- KLA-Tencor (KLAC -2.2%) is joining the selloff even though the company posted an FQ2 EPS beat yesterday afternoon, and provided healthy FQ3 guidance - revenue of $790M-$850M and EPS of $1-$1.20 vs. a consensus of $814.5M and $1.11 - on its CC (transcript). KLA also forecast FQ3 bookings will be in a range of $700M-$800M (implies 10% Q/Q growth at the midpoint), and struck an upbeat tone about 2014 investments in 20nm and 3D NAND flash capacity.
- KLA still expects 10%+ industry growth this year, but admits its outlook is "slightly weaker" than it was three months ago. The company also believes industry adoption of EUV lithography (important for ASML) has generally been pushed out to the 7nm process node from the 10nm node.
Dec. 4, 2013, 4:49 PM
- During a Credit Suisse conference talk, KLA-Tencor (KLAC -2.7%) CFO Bren Higgins stated his company's FQ2 (Dec. quarter) bookings could miss the midpoint of its guidance range. The potential shortfall is attributed to a $100M order push-out for reticle inspection tools used in the production of cutting-edge 10nm chips.
- KLA had guided on its FQ1 CC (transcript) for FQ2 bookings of $800M-$950M ($875M midpoint), up from FQ1's $790M and well above revenue guidance of $670M-$730M.
- Susquehanna's Mehdi Hosseini, who rates KLA a Negative, is "puzzled" by Higgins' explanation, given Intel (long at the bleeding edge of chip manufacturing) is the only company investing in 10nm R&D for now - the chip giant is just getting set to mass-produce 14nm chips - and that KLA's reticle inspection bookings have been in the ~$70M range in recent quarters.
- The reticle inspection market has been a weak spot for KLA. However, during an upbeat September conference talk, Higgins said demand was improving.
- Chip equipment sales have been expected to improve in 2014: Trade group SEMI just estimated sales will rise 23% in 2014, after dropping 13% in 2013.
- Several chip equipment peers have followed KLA lower: AMAT -3%. ASML -2.5%. LRCX -2.9%. RTEC -1.5%. MTSN -2.5%.
Nov. 11, 2013, 8:41 AM
- Twitter (TWTR) has been started at Neutral by Sterne Agee. Shares -1.4% premarket after dropping 7% on Friday in the wake of neutral/bearish coverage launches. Shares still +58% from their $26 IPO price.
- Veeva Systems (VEEV) has received four bullish ratings and two neutral ones on underwriter coverage day. Shares +0.6%.
- American Tower (AMT) has been upgraded to Buy by Citi.
- Youku (YOKU) has been upgraded to Buy by Brean ahead of Thursday's Q3 report. Shares +3.1%.
- BT has been upgraded to Overweight by JPMorgan after outbidding Sky for the U.K. TV rights to Champions League games.
- Netgear (NTGR) has been upgraded to Sector Perform by RBC.
- Deutsche Telekom (DTEGY, DTEGF) has been cut to Sell by Goldman after striking a $729M deal to buy wireline carrier GTS Central Europe.
- Lam Research (LRCX) has been cut to Neutral by Susquehanna.
- Diodes (DIOD) has been cut to Outperform from Strong Buy by Raymond James ahead of tomorrow's Q3 report.
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