Citigroup notes that due to some recent success in its stated effort to improve factory efficiencies, checks suggest Intel (NASDAQ:INTC) is pushing out deliveries of tool orders already in backlog as well as cancelling tool orders it planned to place in CQ3. Net/net, factors like liquidity + private equity continue to keep a strong bid under stocks, but equipment fundamentals quite simply continue to deteriorate due to CQ3 pushouts from Samsung, Hynix, TSMC, and now INTC.
Based on checks with two major vendors, it appears at least $500MM (~10% of INTC's C2007 capex budget of ~$5.5B) has been pushed out. Based on a current quarterly wafer fab equipment order/revs run rate in the $9B range, this amounts to ~5% of total CQ3 tool revs/shipments. These pushouts increase the likelihood that INTC will cut its C2007 capex budget over the coming months - consistent w/its goals to recognize more capital efficiencies.
Who is most exposed? Exposure to INTC in firm's coverage universe is highest at AMAT, NVLS, AEIS, and to a lesser degree KLAC and BRKS.
Dwindling stock supply and private equity remain strong tailwinds, but given deteriorating fundamentals, the firm would look for stocks to pull back near-term focusing new money only on company-specific restructuring stories (like top idea KLAC) where estimates still have a lot of dry powder.
Notablecalls: Interesting comments from Citi's Timothy Arcuri. He's right of course, but looking at the SMH chart I'm not so sure today is the day one should step in front of this train. Look for some initial weakness.